Nova Capital, the London-based niche secondaries specialist, has made two senior hires to add a venture capital operation to its existing buyout-focused business.
Nova, which was set up in 2002 to acquire, or manage on behalf of their owners, portfolios of direct private equity investments, has appointed executives Olav Ostin and David Tate to lead Nova’s expansion into the venture capital sector.
Ostin joins from ETF Group, a venture capital firm headquartered in Lugano, Switzerland. Tate’s previous role was at UK stockbroker West LB Panmure, where he was head of investments.
David Williamson, a Nova co-founder, said in an interview Ostin and Tate had been recruited in order to “spearhead a real attack on the venture space”, where the firm had identified significant opportunities to acquire transatlantic venture portfolios from European managers.
Nova focuses exclusively on purchasing and managing direct investments, as opposed to other participants in the private equity secondaries market such as Coller Capital and Lexington Partners, which originally built franchises acquiring fund investments and have since added capabilities to invest in direct deals as well.
Nova has not raised a fund, but will work with a select group of investors including the mainstream secondaries houses to provide capital for the transactions it sources and executes. One such investor, Caledonia Investments Plc, an investment company listed on the London Stock Exchange, in February of last year acquired a 33 per cent equity interest in Nova.
In late 2002, Nova completed its first transaction, the acquisition of a €100 million portfolio of early and mid-stage buyout investments in 20 UK companies. The assets were acquired from LICA Development Capital, a private equity firm in London.
“We have a strong sense that the niche market that we are operating in is really beginning to open up now,” said Williamson. “At least half the opportunities we are seeing are venture investments, so adding expertise in this areas is a logical move.”
There is indeed evidence that trading of direct secondaries is gathering pace, as owners of relevant portfolios are looking to liquidate assets. Earlier this month, New York-based Protostar Equity Partners announced the proposed $100 million (€79 million) buyout of a portfolio of 47 direct investments from financial services conglomerate CIT Group.
Last year, Global Asset Capital and Hamilton Lane bought out the venture capital portfolio of Vivendi. In March, US firm W Capital bought the venture investments of Tredegar Corp. Dime Bank, British Telecom and Lucent all have jettisoned direct investment portfolios in similar fashion.
In the UK, IRRfc and Vision Capital are pursuing investment strategies similar to Nova Capital.
Vision, which is led buy Julian Mash, last year acquired a portfolio of buyouts from Morgan Grenfell Private Equity in a transaction financed by Goldman Sachs Private Equity Group.
ETF Group, Ostin’s former employer, has over the past 18 months significantly scaled back its operations and closed offices in the UK, Germany and the US. Chris Pelly, a principal at ETF, said the group was concentrating on managing its existing portfolio of technology investments and would not invest new capital.