News: Funds

UK buyout market recovers
The value of buyouts deals for the first quarter of 2002 is up nearly £2bn on the final quarter for 2001, according to figures published by the Centre for Management Buyout Research (CMBOR). The total deal value in the first quarter was £3.65bn. The bulk of this total came from the largest deal, the £2bn acquisition of the Unique and Voyager pub chains. Average deal size is considerably lower though, with the second-largest deal, the £202 million IBO of Dignity Caring Funeral Services, a tenth of the size.

The findings mark a recovery following the depressed second half performance of UK buyout activity in 2001. CMBOR also announced that the total buyout value for 2001 was £19.3bn, a fall of almost 20 per cent on the 2000 figure of £23.9bn, and the first year on year drop since 1993.

There have already been 140 deals recorded to date in 2002, roughly in line with first quarter figures for the 2001 (154) and 2000 (124). However, there has been a drop in activity at the top end of the market, where there have been only four £100m plus deals recorded this year.

The survey also highlights an increasing number of secondary buyouts. In the first two months of 2002, 11 secondary buyouts have been completed, compared with 30 for the whole of 2001.

Tom Lamb, Managing Director UK of Barclays Private Equity, which commissioned the research in conjunction with Deloitte & Touche, said that a turnaround in deal volume was not imminent: ?Although the upturn in headline numbers looks encouraging, we are still some way from a recovery. The downturn has not been long enough or deep enough to cause the sort of pricing dislocation which we saw in the early 90's.?

Yale reconsiders private equity target
In his keynote speech to the EVCA Investors Conference David Swensen, chief investment officer of the Yale University Investment Office, has signalled that the Yale Endowment may look to cut its exposure to private equity investment when the Yale advisors meet later this year.

Swensen, a staunch advocate of diversified fund strategies in which private equity plays a key role, says he is likely to recommend a reduction in private equity when the Yale committee meets in June 2002. ?We currently aim to assign around 25 per cent of our funds to private equity investments. My inclination is that this should be reduced to around 20 per cent of the endowment.?

A risk adjustment study carried out by Yale highlighted the temptation to evaluate private equity returns without incorporating risk. ?We looked at the returns achieved by successful buyouts (36 per cent net) and tallied them with the returns generated by an equivalent investment in the S&P 500 (17 per cent). The difference was significant, but when we incorporated the risk element of buyouts in comparison to the S&P 500, the S&P produced returns of 86 per cent.?

The Yale fund hit its target of 25 per cent commitment to private equity in 2000, although due to the subsequent market downturn, write-downs and distribution this figure currently stands at around 17 per cent. He added that many other university funds ought to increase their commitments to private equity investments in order to achieve the necessary exposure to the asset class.

Baring PE passes $2bn mark
Baring Private Equity (BPE), the private equity and asset management division of ING Baring, has announced that its funds under management have surpassed $2bn. BPE's funds under management increased by 10 per cent in 2001, raising $190m in the process.

BPE raised several funds over 2001, including the Baring Central European Fund, a buy-and-build fund for Central and Eastern Europe, the Russian-facing Baring Vostok Private Equity Fund and the Baring Asia Private Equity Fund II, a follow on fund investing mainly in China, Taiwan, Hong Kong, Korea and India.

Around 74 per cent of Baring Private Equity's capital is generated from a core group of 40 investors and repeat investors who invest in more than one fund. Over 80 per cent of the capital is provided by third-party investors with the remainder provided by parent-company ING Group in the form of seed capital.

Despite the difficult fundraising environment, Baring Private Equity's chief executive Christopher Brotchie was pleased with the company's performance: ?2001 was one of the most difficult years in recent memory for fund raising. $190m of new money is a compelling endorsement from our investors. After six years of growth, Baring Private Equity is now positioned as one of the few international private equity firms that can provide access to all major markets outside the USA.?

ATP to launch €4.5bn fund
The Danish Labour Market Supplementary Pension Fund has announced details of a proposed private equity fund of funds. ATP, the Danish pension fund manager, is planning to launch the ATP Private Equity Managers fund of funds (APEM) with a target to commit €4.5bn over the next three years. The fund's commitment of 10% of total assets makes it one of Europe's largest pension investors in private equity. ATP had previously invested around 1 per cent of its funds in the asset class.

ATP hopes to create a concentrated portfolio of no more than 75 managers, with ATP being among the top ten investors in each fund. 65 per cent of the capital will be invested in buyout funds, with the remainder dedicated to venture capital. Investments will be split equally between the US and Europe, with 10 per cent invested in funds around the world.

Investments of between €10-75m will be made in private equity funds on a global basis from early stage to venture capital, including buyouts and special situations. ATP will also invest between €5-25m in deals led by other private equity funds primarily in Europe. In addition, the fund will undertake direct investments to entrepreneurs, public to private deals and spin-offs in Scandinavia of between €3-15m.

The APEM team will be led by Jens Bisgaard-Frantzen, managing director of private equity at ATP.

Bridgepoint hits €1.6bn
The Canadian Pension Plan Investment Board (CPPIB) has committed €100m to Bridgepoint Capital's Second European Private Equity Fund in a deal that takes Bridgepoint past its target for the first closing. The fund will invest in UK and continental European midmarket buyouts.

Standard Life launches €1bn FoF
Standard Life has published details of its new fund, the European Strategic Partners II fund (ESP II), a private equity fund of funds vehicle which will invest in a combination of European private equity funds and direct investments. The fund, which will be managed by Standard Life Investments (Private Equity) (SLIPE), is the successor fund to European Strategic Partners (ESP), a private equity fund of funds which raised €868m and had its final close in October 2000.

Primary Capital hits £100m target
Primary Capital, the independent middle market private equity fund manager, has reached its £100m target for its second buy-out fund. The Primary Capital II fund plans to invest in management buy-ins and buyouts valued between £5m and £100m within UK and Europe-based companies. About 62 per cent of the fund was raised within the UK, with 21 per cent coming from Europe and the rest from the US. Primary Capital's investors range from insurance and life companies to high net worth individuals and banks, including Abbey National, Norwich Union and Bank of Scotland.

Capvent launches second FoF
Capvent, the Zurich-based private equity fund of funds manager, has launched a second fund-of-funds. Capvent Global Private Equity II (CGPE II) will look to invest in both primary and secondary investments in European and US funds with a value of $50-300m.

Perfectis closes new fund above target
Perfectis Private Equity, the French-based private equity firm, has announced that it has successfully completed the final closing of its Perfectis I fund. The fund will invest in middle market management-led buyouts, buy-ins and growth capital deals. Perfectis was established by former 3i France employees, Jean-Marie Lavirotte and Gabriel Fossorier who aim to pursue a similar investment strategy at Perfectis. The fund has raised €80m at final closing, €5m higher than the original target of €75m. It attracted a broad range of institutional investors including Groupe Crédit Agricole, Partner Re, Caisse Nationale de Prevoyance and Duke Street Capital.

Nestle fund opens
Nestle has announced that Life Ventures by Nestle, the €150m venture capital fund unveiled by the company in autumn 2001, is now fully operational. The Swiss-based fund will have capital of up to €150m and will be managed by Inventages Ventures Capital, an independent German adviser run by Gunnar Weikert. The objective of the fund is to provide Nestle with better access to new science, technology and know-how opportunities, through acquisitions, minority stakes, licensing and joint-ventures.

CBPE closes sixth fund
Close Brothers Private Equity, the private equity investment business of Close Brothers Group, has announced that the CBPE (UK) Fund VI has closed at £202m, of which £90m was committed by first time investors. The fund will maintain CPBE's focus on UK mid-market investments in the £10-£75m range. Approximately 40 per cent of the fund has already been committed to nine investments. Over the next 18 to 24 months, CBPE Fund VI will look to invest in a further six to ten similar transactions.

Prime Edge at €175m second closing
Capital Dynamics' securitised fund of funds, Prime Edge Capital (PEC), has increased its total capital to €175m following a second closing. PEC is the first collateralized private equity obligation (CPO) fund of funds and is a joint venture of Capital Dynamics, which acts as lead manager and Rainer Marc Frey (RMF Group) and Hamilton Lane Advisors, which manage the investment selection and risk management process for Prime Edge.