Under another milestone deal in the rapidly changing private equity fund of funds investment industry, international asset manager and gatekeeper Russell Investment Group has announced the purchase of Pantheon.
Financial terms of the deal have not been disclosed. Although Russell has purchased 100 per cent of Pantheon’s shares, approximately 50 per cent of the new group’s equity will be made available to management and employees as part of a share options scheme.
The news comes a week after Hamilton Lane Advisors, a US fund manager and investment consultant, announced the sale of a large minority stake to a group of investors including the family office of Microsoft chairman Bill Gates.
Under the deal, Russell and Pantheon are to integrate their existing private equity operations and create a single management structure. Senior Pantheon management, led by chairman Rhoddy Swire and senior partners Dave Braman and Carol Kennedy, will continue to run the business.
Overseeing the operation will be Hal Strong, Russell’s CFO and managing director of alternative investments. Helen Steers, who was previously in charge of Russell’s European private equity business, will become a partner, taking to 15 the number of partners at the firm.
The new entity will retain the Pantheon brand and continue to use Pantheon’s offices in London, Brussels, San Francisco and Hong Kong.
The deal creates a private equity fund of funds business with $8bn of assets, of which $7bn are currently managed by Pantheon. The company is one of the largest dedicated private equity managers in the world, competing for mandates from largely institutional clients with rivals such as HarbourVest Partners, Goldman Sachs Private Equity Group and Adams Street Partners.
In an interview, Rhoddy Swire said Pantheon had been exploring ways of changing the firm’s ownership structure for years, talking to different potential partners in the process. Selling to Russell, he said, prepared the business for a new phase of growth, which he expected to be ‘evolutionary’ rather than explosive.
“The two firms share the same culture, an appreciation of their clients and the same view of people as their key assets. Hal Strong and I looked at [partnering] and realised that one and one equalled seven”, Swire commented with a trademark wisecrack.
Pointing to the options scheme, Swire also said a key consideration for doing the deal was to broaden the numbers of equity holders in the business, to put in place a structure conducive to succession and to ensure key employees were immune to rivals’ overtures.
Swire, who joined Pantheon in 1981 and led the firm’s management buyout from former parent GT Management in 1988, said his personal role at Pantheon would not change. “I won’t spend any more time away from the business than I do already”, he said.
Pantheon was advised on the transaction by Hawkpoint Partners and SJ Berwin. Russell worked with Goldman Sachs and Debevoise & Plimpton. The deal is subject to regulatory approval.