Investcorp mulls blind-pool PE fund model

LPs are showing a growing appetite for such vehicles, the firm's head of European private equity tells PEI.

Investcorp is exploring a blind-pool funds model alongside its deal-by-deal model due to increasing appetite from its investors for such vehicles.

The Bahrain-listed investment firm, which has about $23 billion in assets under management across private equity, real estate, credit and hedge funds, may explore dedicated fund vehicles in the medium-term, Hazem Ben-Gacem, its head of European private equity, told Private Equity International.

“We have had a large number of traditional LPs reaching out and saying, ‘Do you have vehicles we can invest in?'” Ben-Gacem said. “We may explore something on that front hopefully not in the too distant future. It’s an evolution of our business model.”

Investcorp has been investing on a deal-by-deal basis in private equity since its 2007-vintage previous blind-pool fund, as well as its Gulf and Turkey-focused vehicle, which closed in 2008. The firm’s investors in the Gulf like the deal-by-deal strategy because it gives them “clarity and visibility on what they are putting their money into”, Mohammed Al Ardhi, Investcorp’s executive chairman told PEI in 2016.

The firm is in market with a tech fund, Investcorp Technology Partners IV, which held a first close on $220 million last year. The firm expects to hold a second close on $280 million “very soon”, Ben-Gacem added.

In Europe, the firm’s deals have delivered a gross internal rate of return of 30 percent since 2009 across about six exits, Ben-Gacem said. Its average return on these exits is about 3.8x.

The firm has also been increasing its bite size on deals, writing average equity cheques of $175 million. Its last three private equity deals were Spanish plant propagation business Agromillora, Norwegian telematics business ABAX and UK-based safety products provider Kee Safety, across which the firm invested around $500 million. Investcorp’s plan is to invest a similar amount in Europe each year, Ben-Gacem said.

Investcorp is also eyeing healthcare and infrastructure as areas it wants to raise funds for. It is launching a dedicated gulf-focused healthcare fund seeking $750 million, and is looking “very seriously” at launching an infrastructure business, which may involve an acquisition.

“How we’re going to do that, whether it’s organic or inorganic, it’s still a topic for us to review internally,” Ben-Gacem said.