News: Buyside

ANTS winds down private equity unit
Abbey National Treasury Services (ANTS), the wholesale banking operation of UK mortgage lender and retail bank Abbey National, is winding down its private equity investment division. According to a market source, six of the seven person private equity team have already left with only Ian Allen remaining to oversee the portfolio whilst considering alternative exit options. Others commented that GPs at the funds where ANTS was invested had yet to receive any news direct from the bank about its plans. The team, which was led by Christian Dummett, had built a £850m private equity and venture capital portfolio. People familiar with the make up of the portfolio say it consists of around 70 individual investments and is relatively young (which will deter secondary buyers), with a large portion of the underlying assets having been acquired prior to the market downturn. This has added to speculation that the value of the portfolio is severely underwater. In a half-year results statement published in July, Abbey said it had written down the value of its private equity assets by £39m, following a downward correction in the second half of last year of £5m. It also indicated that further provisions against private equity losses going forward were a possibility.

Official: the tech bubble is over
The latest data from the National Venture Capital Association in association with Venture Economics and Pricewaterhouse Coopers has revealed that US venture capital investment fell by eleven per cent in Q2 2002 to stand at $5.7bn, the lowest level since the boom in technology investments that started in 1999. The figures show that a total of 819 companies received an average of just under $7m per investment, close to the figures recorded in 1998. According to Tracy Lefteroff, global managing partner at Pricewaterhouse Coopers' venture capital practice, the results were in line with forecasts. ?As expected, total investments for the year 2002 will be well below 1999, the first of the bubble years. However, 2002 is still likely to be the fourth largest year ever for venture investing.? The rise and subsequent fall in US VC investment has been dramatic. At the beginning of 1999, VC investment stood at $6.4bn, with each of the 842 companies receiving an average investment of $7.62m. In just over a year, this had rocketed to $28bn (Q1 2000), when 1800 companies attracted an average of $15m per investment. Overall venture capital investment in 2000 reached the $100bn mark. 2002 is likely to produce total investment levels more comparable with 1998 ($20bn).

Investors shun Asian private equity
The private equity fundraising market in Asia has recorded a dramatic fall in the first half of 2002, according to new figures published by the Asian Venture Capital Journal. In the first six months of 2002, Asian private equity vehicles raised $544m, 85 per cent down on the total generated in the first half of 2001, when $3.9bn was raised. The most notable fundraising effort this first half was Carlyle's Asia Partners II, which closed on $170m. The fall in investments was less dramatic, recording a fall of 33 per cent to stand at $5.14bn. South Korea is the notable exception to the downward investment trend, with 36 per cent of the region's total investment heading there. The other four major recipients of capital investment comprised Japan, Australia, Hong Kong and Indonesia.

LPs released from $3bn of US venture commitments
US firms raised a total of $4.6bn for venture capital investments in the second quarter of 2002, an increase of $1.1bn on the final quarter. Figures published by VentureWire show a total of 30 venture capital funds announced closings in the second quarter, raising an average of $150m per fund. However, the figures are distorted by Warburg Pincus closing its eighth fund during the period. The fund, which will invest across a broad range of stages including venture capital, expansion finance and buyouts, raised an additional $2.5bn in Q2 to close at $5.3bn.

The most telling aspect of the quarter's fundraising total was that while $4.6bn was being raised for investment, $3bn was going the other way as firms continued to release LPs from commitments to large venture capital funds. In June US house Walden International and Worldview Technology reduced their respective $1bn funds by 25 per cent. In May technology venture capital firm Benchmark Capital cut the total size of its European fund from $750m to $500m.

AFIC seeks investment reform
French venture capital association AFIC has called for pension fund reforms to boost private equity investment in France. In a recent report, AFIC stipulates a relaxation of the regulations on domestic insurance fund investment in private equity funds, which it sees as a factor influencing the smaller size of French PE funds than those raised in the US and UK. It is also proposing an increase in the availability of fund of funds opportunities to investors. The association believes that the composite structure of an FoF will help reduce investor exposure whilst serving as a useful point of entry to higher level returns that are achievable through private equity.