When buyout giant KKR listed its $5 billion KKR Private Equity Investors vehicle in May this year, it was a triumph for the firm itself. The move was no doubt equally celebrated by Euronext Amsterdam, the stock exchange which played host. Since then, Euronext has laid out the welcome mat for several other private equity firms, with US fund of funds manager HarbourVest Partners reportedly the latest to mull the possibility of listing a fund in the Dutch capital.
Given the claim of London to be Europe's – if not the world's – pre-eminent financial centre, the relative absence of private equity fund listings there gives pause for thought. What is less of a surprise is that the fightback appears to have commenced. At a recent seminar at the headquarters of law firm SJ Berwin, London Stock Exchange senior manager Andrew Wallace unveiled details of the LSE's new Specialist Fund Market, which he billed as “the world's first public capital market dedicated to highly specialised investment funds”. The new market officially opens to new admissions on November 1st.
The market ostensibly provides alternative asset vehicles, including private equity funds, with a more suitable listing environment than the current options on the LSE. Under Chapter 15 of the Listing Rules, the Official List demands that funds and fund managers alike must comply with a highly prescriptive set of rules (though a new, less prescriptive version is due to be published in spring next year). The Alternative Investment Market, meanwhile, is tailored more to the needs of small growth companies than large investment funds.
In promotional material, the LSE claims that the Specialist Fund Market “arguably has a slight edge over Euronext as it will not have any minimum capital requirements or requirements for a certain proportion of shares to be held in public hands”. Euronext stipulates a minimum market cap of €5 million and that 25 percent of a listed investment entity's shares are held by the public.
In his address, Wallace claimed the new market was seeing “healthy appetite from around the world, both pre- and post-liquidity issues”. In the battle to attract listed alternative asset fund business, London is touting what it believes is a compelling proposition.
HIG OPENS IN PARIS AND HAMBURG
HIG Capital, the US-based provider of capital to small- and medium-sized companies headed by Sami Mnaymneh, has opened its second and third European offices in Paris and Hamburg. The offices are part of a strategic plan following the final close of its €600 million ($817 million) dedicated European fund, HIG European Partners, in July this year. At the same time, HIG opened its first European office in London and said that it wanted to recruit more than 30 investment professionals in Europe by the end of the year. The Paris and Hamburg offices have a total of seven professionals: two in the former location and five in the latter. Patrick Caron, previously with Bank of America Capital Europe, heads the Paris office, while Wolfgang Biedermann, previously with Pricap Venture Partners, Schroders and Boston Capital Group, heads German operations.
INDEX OF UK LISTED FUNDS LAUNCHED
Swiss listed-private equity research and indices publisher LPX has launched a UK index including 22 investment vehicles with a combined market capitalisation of €15 billion ($21 billion). The index contains London Stock Exchange and AIM-listed vehicles which invest a minimum of 50 percent in private equity. The vehicles must meet certain liquidity criteria and have a minimum market capitalisation of €20 million. Firms listed on the index include 3i, Intermediate Capital Group and SVG Capital.
GILDE CLOSES ON E150M FOR HEALTHCARE
Gilde Healthcare Partners, a European venture capital firm, has closed Gilde Healthcare II, its second fund, on €150 million ($213 million). It is one of the largest venture funds dedicated to investing in European healthcare opportunities. The fund closed ahead of its €125 million target with a mixture of re-commitments from investors in the first fund and a small select group of newcomers. Pieter van der Meer, a partner, said: “We will deliver to investors in the first fund an attractive return. We are expecting to triple their original investment when the fund is fully exited.” To date the firm has sold five out of 12 investments from the first fund.
GERMANY'S AUCTUS CLOSES SME FUND
German firm Auctus Management has held the first and final close of its second fund on €39 million ($55 million). The firm, which invests in small- and medium-sized businesses, raised its initial hard cap from €30 million due to investor demand. The fund was nearly two times oversubscribed and some would-be investors were denied access. The fund will complement the firm's evergreen fund, giving it more than €100 million to invest in total. Limited partners include European and US funds of funds as well as some entrepreneurs. The fund has already made five investments which had been warehoused by the evergreen fund.
DBG AIMING TO DOUBLE UP
DBG Eastern Europe is targeting €125 million ($178 million) for the closing of its third fund early next year, according to a partner at the firm. This is nearly double the size of its €67 million predecessor fund. Jacek Korpala, a partner at DBG, said the changing fortunes of Central and Eastern European business, spurred on by the enlargement of the European Union, are driving interest in the firm's latest fund. “There is easier access to leverage and management teams are more mature in Central and Eastern Europe now. It is generally easier to do business and it is becoming comparable to Western Europe,” Korpala said. “The only difference is the size of the companies. Our target market of €10 million to €50 million would be regarded as small cap in the West but here it is the lower middle market.”
INDUSTRI KAPITAL WINS BACK INVESTOR SUPPORT
Investors have flocked to mid-market European buyout firm Industri Kapital's sixth fund, which has closed with total commitments of €1.675 billion ($2.4 billion), more than double the previous fund, Industri Kapital 2004 Fund. The final close marks the last chapter in the firm's rehabilitation after investors gave it a bloody nose on its previous fundraising. Then the firm's ambitions to join the mega-buyout firms exceeded investor appetite and instead IK had to settle for a more modest €825 million fund. However, investors that stuck with the firm have been amply rewarded. According to Mads Ryum Larsen, IK's partner for investor relations, the 2004 fund has already paid out in full. He said: “We have had four years of massive realisations. The 2004 fund already looks stellar. We have had three exits returning a total of €986 million on a cost basis of €129 million. That is a multiple of 7.6 times. We have called down €700 million in commitments. It has been a big turnaround.”