Is it possible for a private equity boom to be simultaneously forging ahead and running out of steam? Logically inconsistent, this is nonetheless the conclusion that might be drawn from a recent survey of limited partner attitudes to the asset class.
In the latest version of its Global Private Equity Barometer, Londonbased secondaries specialist Coller Capital identified what it described in a statement as “two signs that the private equity boom may be approaching a plateau”.
The two signs are, in fact, interlinked. One is the “significant proportion” of LPs believing that the exit environment for European and North American buyouts will deteriorate over the next year or two (43 percent think this with respect to Europe and 44 percent with respect to North America).
This less upbeat view on the exit environment feeds into the second ‘sign’, which is that of declining distributions. In the equivalent survey two years ago, around 65 percent of LPs expected the rate of distributions to speed up over the following 12 months. This declined to just over 50 percent a year ago, and now stands at just over 30 percent (see accompanying graph). Does this mean that more cautious LPs are now preparing to rein back their commitments to the asset class? Not a bit of it. With 97 percent of investors professing pleasure at their private equity returns over the last year, almost half (49 percent) are plotting instead to hike their private equity allocation up over the next year.
Even as performance expectations begin to waver, a tidal wave of new capital is set to wash over GPs. Interesting times ahead.
LANGHOLM TO WIDEN INVESTOR BASE
Langholm Capital, a UK mid-market buyout firm focusing on high growth consumer sectors, has begun sounding out investors for its second fund, which it will begin formally marketing in the second quarter of 2007. An investor in the firm's 2002-vintage €225 million fund said Langholm, which is headed by partners Bert Wiegman and Christian Lorenzen, was keen to widen its investor base for the second fund and to dilute the amount committed by UK consumer goods manufacturer Unilever, which has a 40 percent stake in the current vehicle. Langholm declined to comment.
ACCESS CAPITAL PASSES TARGET WITH €307M
Paris-based fund of funds specialist Access Capital Partners has closed its ACF III Mid-Market Buy-Out Europe fund on €307 million ($399 million). The initial target for the fund, which will invest in mid-market buyouts, was €250 million. The firm said that commitments have been made to 15 funds including three secondary positions and that the fund is expected to be fully committed by mid-2007. Founded in 1999, Access Capital has approximately €1.65 billion ($2.14 billion) in assets under management and opened a second office in Munich in December 2006.
ARGUS RAISES SECOND CEE FUND
Argus Capital Partners, a Central and Eastern European private equity fund, has held the final closing of its second fund, Argus Capital Partners II, on €263 million ($344 million), exceeding its target of €200 million and its hard cap of €250 million. The fund has received commitments from 22 investors, several of which invested in Argus Capital Partners Fund I, which closed in September 2000 on €132 million. The first investment from the fund is a majority stake in GTX Hanex Plastic, a Polish manufacturer of polyethylene, from Montluc, an investment vehicle owned by an unnamed Polish entrepreneur, for an undisclosed amount. Montluc remains a minority shareholder in the company, which is based in Pozna.
PLATINA CLOSES TWO RENEWABLE ENERGY FUNDS
Platina Finance, which has offices in London and Paris, has closed a €56 million ($74 million) fund, Mistral Wind Farms I (MWF I), which will focus on the construction and management of wind farms in the UK and France. It has also closed Mistral Energy II (ME II) at €30 million, which will make early-stage investments in continental European wind energy, wave energy, bio-fuel and geothermal projects. The fund is twice the size of its €15 million predecessor, ME I.
EQT HOLDS CLOSE ON €4.25BN
EQT, the Northern European private equity group, has closed its latest fund, EQT V, on €4.25 billion ($5.5 billion), turning away commitments of almost €2 billion in the process. The fund held a first closing in August 2006 on €2.2 billion with a target of €3 billion, which it has comfortably outstripped. Bjørn Høi Jensen, senior partner and head of EQT Equity, said: “We have no intention whatsoever to do club deals. This fund gives us a little more firepower.”
PARTNERS GROUP INCREASES ASSETS
Partners Group, the alternative assets group listed in Switzerland, said in a pre-close trading update that its assets under management had increased to CHF17.3 billion (€10.7 billion; $13.9 billion) in 2006, from CHF10.9 billion the previous year. However, it expects growth to slow in 2007. The firm said 73 percent of its assets were in private equity, with 16 percent in hedge funds, 6 percent in private debt and the rest in the group's wealth management business. Established in 1996, Partners Group is led by chief executive Steffen Meiser, and has offices in Zug, London, New York, Guernsey and Singapore.
ENGLEFIELD II RAISES €1BN
Englefield Capital II has closed with commitments of €1.060 billion ($1.3 billion) and will focus on equity investments in Europe of between €30 million and €150 million. Bregal, the investment vehicle of the Brenninkmeijer family, French insurer AXA and Delta Lloyd, part of insurer Aviva, have backed the fund alongside more than 120 individuals. Englefield was formed in 2002 and its first fund of €706 million has invested in ten businesses.
PRIVATE EQUITY FUNDS BOOST AIM
Private equity and property funds accounted for more than 50 percent of all new money raised on London's AIM market in 2006, according to research by Grant Thornton, a UK corporate finance company. The market raised almost £10 billion (€15 billion; $20 billion) last year, exceeding 2005's £6.46 billion. AIM's fundraising records come despite a slowing rate of growth by net company additions, which fell from 378 in 2005 to 217 in 2006.