Outward bound

Some of the world's most active limited partners are based in the Netherlands. What are they looking for in private equity? And is the asset class delivering? Colm Gilmore spoke to AlpInvest, Mn Services, Robeco and Wilshire

For a country that has a long history of export and trading with the outside world, it comes as no surprise that the Netherlands' limited partners have a global perspective when it comes to deploying their capital.

In addition to major international corporations such as oil giant Shell and communications company Philips, which make significant commitments to the asset class, the Netherlands is home to some of the largest and most prolific pension fund investors active in global private equity. Arguably the most noteworthy among them is AlpInvest Partners, one of the three largest private equity investors in the world along with the California Public Employees' Retirement System (CalPERS) and GIC, the Singapore government investment corporation.

The Amsterdam-based firm has had a busy year. In February, Dutch bank NIB Capital transferred ownership of its private equity business to joint venture partners ABP and PGGM whose money it manages and reinstated the old name AlpInvest as part of the transaction. AlpInvest's €14 billion of assets then under management was increased by a further, fresh €6 billion mandate from ABP and PGGM.

ABP and PGGM have €150 billion and €53 billion of assets under management respectively. Following their most recent allocation to the asset class, private equity accounts for almost 2.5 percent of ABP's investment portfolio and approximately 7 percent of PGGM's. Both funds have representatives on AlpInvest's newly established supervisory board – Jean Frijns, CIO of ABP, and Roderick Munsters, CIO of PGGM.

According to Wim Borgdorff, managing partner and head of fund investment at AlpInvest, the new mandate represents an affirmation of the group's continuing strategy. The capital will be allocated roughly as follows: €3.5 billion to primary funds, €1 billion to secondary funds, €1 billion to co-investment and €500 million to AlpInvest's direct investment programme in Benelux and Germany. The firm will continue its diverse geographic fund investment strategy, committing roughly 45 percent to the US, 45 percent to Europe and the remaining ten percent to emerging markets, particularly Asia.

Despite positive developments in the latter region, AlpInvest won't be rushing to change its geographic allocation mix. Says Borgdorff: “We relate our allocation strategy to the size of the opportunities in a region. We believe it needs to be a long-term way of thinking, and we won't change overnight.”

The firm does invest in funds close to home, but also operates a direct investment programme in the region, committing around €200 million annually to Germany and Benelux. Borgdorff thinks AlpInvest is in a good position with regard to assessing mid-market deal flow in its home region: “Our position in Benelux is such that we see around 95 percent of all opportunities flowing through the marketplace.”

Where Borgdorff does have some concerns is in the context of how private equity is maturing, let alone its potential saturation with capital: “If you push too much money into the marketplace, the outcome is predictable. Private equity is a capacity-constrained part of the financial marketplace, unlike public equities. I think the aggressiveness of many new investors trying to invest in private equity is a little over-zealous.”

The struggle for access to top decile funds means that Borgdorff and his team can't sit around and wait until placement agents arrive at their door with a completed PPM. Preferring to adopt what he calls a “turn-the-world-upside-down” strategy, AlpInvest has a dedicated 20-strong team in New York and Amsterdam working on assessing global fund investment opportunities. Says Borgdorff: “That way, we can agree with general partners in advance of their formal fundraising and can generally secure the allocations we're aiming for.” Borgdorff believes that Dutch pension funds have an advantage over other European players having been early proponents of private equity compared to pension funds in the UK and other countries which have been slower to embrace the industry: “From the perspective of European GPs, I think Dutch pension funds have a better long-term profile.”

Another long-term player in the Netherlands is Mn Services, which has administered Dutch pension schemes for more than 50 years. Mn's biggest client is the Pension Fund for Metal working and Mechanical Engineering. With €22 billion under management, the group currently serves the interests of 1.1 million Dutch workers and their employers.

Private equity has long played a major part in the allocation strategy of the Rijswijk-headquartered firm. Mn entered the asset class in 1987 and has committed over €2 billion since then. The group now looks to commit between €250 million and €400 million to private equity investments on an annual basis.

According to alternative investment director Jos van Gisbergen, the fund's goal is to increase its private equity allocation to up to five percent (although the target is constantly shifting due to the nature of private equity capital flows, van Gisbergen says the allocation currently stands just under that number). The alternative units group of Mn Services' investment programme also has substantial exposure to hedge funds (target allocation: 3.5 percent) and commodities (3 – 3.5 percent).

On the basis that, according to van Gisbergen, the group's policy when investing in private equity is to look for “absolute returns” and to “focus on multiples rather than IRR”, the strategy might well be viewed as opportunistic rather than a formulaic, matrix approach. “Our main focus is to go with the best funds in the market with the best teams. It doesn't matter where they are geographically, although we believe that a market has to be really mature to get great returns from private equity.” Accordingly, Mn Services doesn't have “200 or 300” relationships with fund managers, preferring instead to run a more focused programme. Although the group will look at smaller niche funds, van Gisbergen says their preference is to be involved in bigger ticket funds, committing between €25 million and €75 million to something like five or ten funds annually. The maximum exposure to any one fund will in principle be capped at 15 to 20 percent of the overall fund size.

Recognising that their allocation towards the asset class is much coveted among fund managers, van Gisbergen finds many groups knocking on his door. However, those callers typically don't have much success with a proactive approach.

“Don't call us, we'll call you” is van Gisbergen's motto. He makes his own wish-list of funds that he believes Mn Services should be involved with and begins to approach them early in the fundraising process, well before they come to market: “We knock on their door and show them our track record since 1987. We demonstrate that we have a long-term commitment to the asset class and give them references to show that we are one of the solid, long-term players in the industry. If we don't get into a fund first time round because of over-subscription, we generally do next time round.”

What van Gisbergen won't do is acquire secondary positions to get access to much sought after top tier funds. “That's not a smart way to try to get into a fund. You pay a really high price, and there's no guarantee of getting invited into the next fundraising.”

So how does Mn Services view other limited partners in the region – friend or foe? Several institutions are active in the class, but given the scale and diversity of the opportunities on offer to the major pension funds, van Gisbergen doesn't see this as a problem: “Access to quality funds is generally pretty good. Even if other Dutch investors are looking at the same opportunity, we're not really competing for the same piece of pie. Frequently, those groups will allow more than one [Dutch pension fund] into the fund.”

“Do we swap notes on funds? Not really. If a GP tells me that another Dutch fund is looking at the same fund, we might well have a telephone conversation about some of the issues, but we do our own homework and make our own decisions. Just because one particular party decides to go with Fund X doesn't mean it's the right decision for us.”

In terms of specific investment opportunities within the region, van Gisbergen confirms that driving excellent returns is his main focus, rather than local sensitivities: “If a Benelux fund has a good niche, an excellent team and is producing higher returns, then absolutely, we would love to back them.” However, what he has seen to date is that the market is crowded with local and international funds, with the better deals being done by the bigger, international players.

Van Gisbergen also thinks that the LP/GP relationship has changed. Good quality GP teams want to have a good relationship with quality, long-term, committed limited partners in his opinion, making it increasingly difficult for newcomers to get into the market. And don't expect his group to make any room for others going forward: Mn Services is clearly here to stay.


Firm AlpInvest Mn Services Robeco Alternative Investment Wilshire Associates
Headquarters Amsterdam Rijswijk Rotterdam Amsterdam
Global assets under €20 billion €22 billion €110 billion n/a
Total assets invested in €20 billion 2 billion €500 million $2.5 billion
private equity
First commitment to 1999 1987 2000 1997
private equity
No. of investment 55 4 8 28
Other offices New York, Frankfurt, None Frankfurt, Boston Santa Monica,
Antwerp Pittsburgh, Canberra
Key contact: Wim Borgdorff, Head of Jos van Gisbergen, Ad van den Ouweland, Dan Allen, Managing
Fund Investment Alternative Investment Managing Partner Partner

Robeco Alternative Investment uses an allocation matrix that distinguishes between geography and stage investments, rather than making ad hoc commitments. According to van Zanten: “We have a specific view on how this product should be invested. We use bandwidths that provide good visibility for investors and flexibility for us to develop opportunities.”

The group currently commits 50 percent to North America, 40 percent to Western Europe and the remaining ten percent selectively to emerging markets. In terms of stage allocation, the division is 20 percent venture capital, 40 percent development capital and 40 percent for buyouts.

The group's target clients are institutions that don't have a significant allocation to the asset class yet and are looking to build a well-diversified portfolio. Van Zanten believes that the team's experience, investment style and reputation mean that the group is a limited partner that gets good access to the funds in which it wishes to invest.

“When negotiating terms and conditions, perceived “blue-chip” names have an easier time in setting terms”

Although van Zanten believes that the relationship between general partners and LPs is changing, some things remain constant: “When negotiating terms and conditions, perceived “blue-chip” names have an easier time in setting terms.” And although Robeco has a strong longterm corporate governance strategy in public companies, its intention in private equity is more focused on aligning investor interests with fund manager interests: “As a fund of funds, we cannot be a shareholder activist,” says van Zanten.

Another fund of funds player based in the Netherlands is Wilshire Associates. Although the firm has its European head office in Amsterdam, according to director William van Eesteren, the $2.5 billion of assets under management is both raised and invested on a global basis. Wilshire hasn't invested in a Beneluxspecific fund to date, but has been involved in funds which have carried out significant transactions in the region.

Van Eesteren believes that funds of funds have shaken off a slightly negative perception among some GPs in the late 90s that didn't want to see too many of them in their funds: “Post-bubble, GPs have realised that funds of funds can be very stable partners. We're in this business on a long-term basis and we get very good access to funds in the US mid-market and here in Europe.”

Wilshire runs a vintage year programme, diversifying allocation by geography, stage, sector and time. It is currently raising its sixth fund since its Private Markets Group began building a discretionary fund of funds programme in 1997 (the firm has been providing private equity advisory services since 1984).

In terms of allocating funds, van Eesteren thinks that the market is becoming increasingly efficient and that more and more number crunching and information modelling is required: “Our data request is substantial. General partners respect the fact that we take things seriously.”

At the same time though, he reckons that no matter how much you analyse past performance and track record, personality still has a large part to play: “In the end a lot of it still comes down to gut feeling. We look to identify managers who can identify and exploit inefficiencies in an increasingly efficient market.”

Like Wilshire's founder, chairman and CEO Dennis Tito – the man who in 2001 became the first civilian to travel in space aboard the International Space Station and who studied astronautics and aeronautics at college – Wilshire clearly believes that investing in the asset class isn't rocket science.

With its deep reach into international capital pools, Wilshire is another reason why the Netherlands is well worth a visit for any general partner seeking to garner funds. Given their early move into the asset class, their progressive approach to investing and the determination to remain active, long term players in global private equity, Dutch LPs are great friends to have.