VALUE WHILE DEALS LAST

Investors in Partners Group's brand-new secondary fund will be released from their commitments should deal flow dry up

In August, Zug, Switzerland-based alternative investment specialist Partners Group closed Partners Group Secondary LP, the firm's first dedicated secondary vehicle launched in September 2003. The oversubscribed fund was capped at €500 million ($617 million) but, according to a source close to the firm, attracted requests worth in excess of €800 million.

Before launch, Partners' marketing experts positioned the fund carefully. They even coined a new phrase to help differentiate it in the marketplace, labelling its target assets “manager secondaries.”

As defined by Partners, manager secondaries are interests in private equity partnerships that are between two and four years old and between 50 and 70 percent drawn down. The attraction? “Manager secondaries sit at the lowest point of the J-curve,” said Urs Wietlisbach, partner and co-chairman at the firm, describing the fund's relative value approach. “They are most likely to be mispriced, as many of the underlying assets will still be held at cost.”

Primary funds that Partners has already invested in and hence knows well are of particular interest to the new pool.

Banks, insurance companies and pension funds from Germany, Scandinavia, the UK and the US provided the bulk of the fund's capital, Wietlisbach said, adding that €100 million of the capital has already been invested.

Commenting on current deal flow in the fund's target segment, Wietlisbach said that as investor sentiment towards private equity was improving, attractive investment opportunities were becoming harder to find than they were a year ago.

However, the fund has a structural feature designed to protect both the manager and its secondary investors in the (not very likely) event that deal flow should dry up altogether. Management fees are payable on drawn capital only and, if the full €500 million proves impossible to invest, LPs will be released from any commitments that remain uncalled.

For the time being, however, there are no signs of the market grinding to a halt. “We constantly have bids out worth €50 million to €60 million,” notes Wietlisbach. Clearly, at this point in the cycle, plenty of secondary business remains to be done. (For more on secondaries, see this month's cover story on p. 49)

EXPONENT RACES TO £400M FINAL CLOSE
The UK mid-market firm formed by four ex-3i executives has announced a final closing of its debut fund, Exponent Private Equity Partners, less than five months after it was launched. The fund had an initial target of £300 million to £350 million and was capped at £400 million (€595 million; $730 million). The fund attracted a broad range of institutional investors from around the globe including 28 percent from the UK, 30 percent from continental Europe and 42 percent from the US. Investors in the fund include Allianz Private Equity, Danske Private Equity, HarbourVest Partners, Hermes Private Equity, LGT Capital Partners and Massachusetts PRIM. Helix Associates acted as placement agent for the fund.

new €500m European debt Fund for Carlyle
The Washington DC-headquartered private equity firm has launched a €500 million ($613 million) European leveraged finance fund to invest in senior and mezzanine loans and high yield. The new business will be spearheaded by managing director Mike Ramsay, who was formerly head of leveraged finance at Prudential M&G and has worked in the European debt markets for the last ten years. He will take up the post in late September, based in Carlyle's London office. Bank of Scotland Corporate is a strategic investor in the fund, while JP Morgan is serving as an arranger. Carlyle has had a leveraged finance business in the US since 1999, managing $3 billion of assets in six collateralised debt obligation funds.

EQT ANNOUNCES €2.5BN FINAL CLOSE
The Nordic-based private equity firm has closed its latest fund EQT IV on €2.5 billion ($3.1 billion) six months after launch, in excess of the original €2 billion target. Investor AB, the investment vehicle of the Wallenberg family that founded EQT in 1994, committed €500 million to the fund. Nordic investors accounted for 40 percent of the total (€1 billion), 25 percent came from the UK and continental Europe, 25 percent from North America, and ten percent from the rest of the world. Sources close to the fundraising said it attracted around 85 institutional investors out of 100 in total. The fundraising was advised by placement agent MVision Private Equity Advisers and law firm Clifford Chance.

€250M FINAL CLOSING FOR ACCENT
Accent Equity Partners, which was formed in April 2003 following Nordico's recruitment of key members of fellow Swedish private equity firm Euroventures, has closed its debut fund on €250 million ($300 million). A first closing of €75 million in August 2003 followed a marketing exercise focused on existing investors in Euroventures and Nordico funds, including Sixth AP fund and Dansk Kapitalanlaeg. James Moore of UBS Private Equity Funds, which acted as placement agent, said the fund attracted a “good cross-section” of investors and CEO Jan Ohlsson capped the “substantially oversubscribed” fundraising at €250 million in order to retain the firm's focus on the Nordic lower mid-market. According to Ohlsson, the fund is now “slightly below 20 percent invested”.

LARGEST ITALIAN FUND EVER RAISES €700M
Investitori Associati, the Milan-based private equity firm has closed its fourth buyout fund on €700 million ($864 million), €100 million above its original target. The fund is substantially larger than the firm's last vehicle, Investitori Associati III, which closed in 2000 on €400 million. Fiftyeight limited partners invested in the new fund, of which 13 committed more than €20 million each. During the 1990s, Investitori Associati made its name participating in transactions such as Panini, the sticker maker, and the first buyout of Seat Pagine Gialle, the directories business. Clessidra Capital, the first time Italian fund that achieved a first close of €560 million last year is currently working towards a €1 billion target.

HUTTON COLLINS CLOSES MAIDEN FUND, WILL LIKELY RAISE AGAIN IN 2005
The London-based European investor has announced the final closing of its debut fund. The firm raised €235 million ($285 million) in total. Investors in the fund include Adams Street Partners, Pantheon Ventures, Northwestern Mutual, Credit Suisse First Boston and Bank of Scotland. Capital Z Investment Partners, the US fund investor which bought out Abbey National, Hutton Collins' original cornerstone investor, in February 2004 also invested in the fund. The firm has so far deployed €90 million in four transactions. “Given the rate of investment, it is likely that Hutton Collins will launch its second investment fund during the course of 2005,” a spokesman for the firm said. Transparent Capital acted as placement agent.

EQUEST RAISES €32M FOR BULGARIAN DEALS
The London-based private equity firm, has raised €32 million for investment in Bulgaria through a vehicle listed on the Irish Stock Exchange. Institutional investors based in the UK, Switzerland, Austria, Sweden, Germany, Ireland and the US committed 80 percent of the capital, including Commerzbank London and Griffin Capital, the investment management company. Equest was established in 2001 to manage and advise investments in emerging markets. The firm also has a Sofia office.

NORWAY'S FERD COMPLETES €151M FIRST CLOSING
Ferd Equity Partners, the private equity arm of private Norwegian industrial group Ferd AS, has announced the first closing of its debut fund on NOK1.25 billion (€151 million; $186 million). Ferd AS was the largest investor in the fund, though the amount committed was not disclosed. The fund attracted 15 other Norwegian institutional investors including Orkla, an industrial conglomerate, and Storebrand Livsforsikring, the life insurance arm of financial services group Storebrand. The fund will be managed by managing partner Gert Munthe and fellow partners Tore Rynning-Nielsen and Morten Blix. Ferd Equity Partners is 60 percent owned by its six employees and 40 percent by Ferd AS.