Opening the door

For a man whose firm appears poised to conclude its second fundraising just over a year after its first, Claudio Aguirre of Madrid-based Altamar Private Equity seems remarkably relaxed. Only once during the interview with PEI does a sense of urgency intrude on proceedings, when a capital call form that needs Aguirre's immediate attention is placed under his nose.

The tranquil demeanour should fool no-one though: since he returned to his native country three years ago after spending 15 years in the UK, Aguirre has been busily promoting a quiet revolution in Spanish private equity. Before then, Iberian-originated investment in the asset class was extremely thin on the ground. Since Altamar launched the first ever Spanish private equity fund of funds in 2004 specifically targeting domestic LPs, interest has burgeoned.

It was back in November 2003 that Aguirre left behind a prestigious investment banking career to return to his homeland. The culmination of long spells at Goldman Sachs and Merrill Lynch in various senior roles was a four-year stint at the latter as head of investment banking for Europe, the Middle East and Africa (EMEA). Now in his late-40s, Aguirre decided it was “a good time to go back to Spain and start a new project. I'd had it in mind for a while to do something about the lack of private equity access for Spanish institutional investors.”

Aguirre launched Altamar (which means ‘open sea’ in English) together with co-founders José Luis Molina, formerly a European principal of the Lehman Brothers Merchant Banking Fund, and Mariano Olaso-Yohn, a founding partner of Vista Capital, the Spanish private equity joint venture between Banco Santander and the Royal Bank of Scotland.

Although the last two years have been frenetic, the first year demanded patience as the new firm was forced to wait fully 12 months to gain approval as an asset management company from CNMV, the Spanish financial regulator, and the Government's Ministry of Economics. The delay did, however, give Aguirre the opportunity to put a team in place as well as call on pensions, insurance companies and family offices to educate them about private equity.

Altamar was rewarded for its proselytising when its debut fund, Altamar I, closed on a hard cap of €305 million ($384 million) in June 2005. The vehicle, which is now 90 percent committed, drew allocations from 12 Spanish institutions which, says Aguirre, were mostly investing in private equity for the first time. They included pension schemes managed by Banco Santander and BBVA and savings bank Caja Madrid. He adds that one or two family groups also came to the table.

I'd had it in mind for a while to do something about the lack of private equity access for Spanish institutional investors

Claudio Aguirre

Arguably the biggest test for any fund of funds, and particularly a newcomer, is its ability to gain access to brand names. In this respect, Altamar I passed with flying colours. Its 85 percent allocation to non-Spanish European buyout funds included the likes of BC Partners' €5.5 billion BC European Capital VIII (“BC only brought in three or four new investors and we managed to be one of them,” says Aguirre) and CVC Capital Partners' €6 billion CVC European Equity Partners IV. Meanwhile, a 15 percent carve-out for global funds went into Blackstone Group's $15.6 billion Blackstone Capital Partners V.

Aguirre reflects that “at the outset, a lot of people thought that what we were doing was crazy because there were already so many funds of funds in Europe”. He suggests a number of reasons for the debut fund's popularity. One was the contacts and experience that the Altamar team had developed in their prior careers. “The three of us have all sat on the other side of the table and GPs feel reassured that for many years we were doing what they're doing.” Aside from long spells advising financial sponsors, Aguirre was also responsible for a $75 million Spanish private equity fund managed by Goldman Sachs.

In addition, the fundraising coincided with changes in Spanish tax regulations, which allowed domestic institutions to devote larger portions of their portfolios to private equity and also reduce the tax burden associated with investing in the asset class. Aguirre says that, for this reason, even those institutions that already had private equity exposure came into the fund because they liked the local structure. These experienced investors included Fonditel, manager of the Telefonica pension plan, the largest corporate pension in Spain.

Aguirre insists that Altamar has won respect for the quality of its research, a function that is overseen by a six-strong team including former Merrill Lynch analyst Álvaro González and Javier Maté, who joined in January this year having previously worked in PricewaterhouseCoopers' private equity transaction services department in Frankfurt. Aguirre describes the research effort as Altamar's “number one priority” and talks proudly of the firm's voluminous research documents.

Buoyed by its experiences with the debut fund, Altamar launched a successor in June this year and announced a first closing on €200 million the following month. At the time of going to press, Aguirre said the money raised at first closing was already around 25 percent committed and that the fund would aim to post a final closing on approximately €350 million by the end of the year. This would put the firm slightly ahead of its target of having fresh funds available every two years.

Aguirre says the new fund is in the process of expanding its investor base. “Most of the commitments so far are re-ups, but with smaller amounts committed. We've opened up more to regional savings banks in order to become a little more diversified.”

Having focused on Europe while only dipping a toe into the US in Fund I, the new vehicle is broadening the horizons of its investors by targeting 60 percent of the capital at Europe and 40 percent at the US and Asia. Like the first fund, the second fund excludes investment in Spanish funds. “Spanish institutions should be able to cover Spain for themselves because they already have the relationships,” insists Aguirre. Also in common with the debut fund, the successor will focus only on buyout funds.

While the ability to raise a successor fund appears to provide vindication of the first vehicle's strategy, so too perhaps does the willingness of a competitor to seek to replicate it. In September this year, Arcano Capital, a Madrid-based corporate finance house, announced a first closing of its debut fund of funds on €125 million, halfway to a final closing target of €250 million. Like Altamar, the fund is seeking to provide Spanish investors with access to non-Spanish private equity – in its case, by focusing on Western European and US private equity funds, with a 20 percent allocation to secondaries.

In facing up to the presence of a newcomer to its space, Altamar can reflect on the old saying that imitation is the sincerest form of flattery.