Investor Base: LPs strengthen funds business(2)

In the last few years, some institutional investors have been actively building up their direct investment arms – often at the expense of their traditional fund commitment divisions. The big Canadian pension funds have often been in the vanguard of this trend; for instance, last year The Ontario Municipal Employees’ Retirement System held a large private equity sale and parted company with its fund commitments expert, Martin Day, as part of its move to concentrate on direct investing. 

However, in recent months, some big LPs have been bucking this trend by strengthening their fund commitments business.

Dutch pension administrator APG has quietly been building up its internal team, recently hiring former AlpInvest Partners executive Iain Leigh as global head of private equity in its New York office. Earlier this year, it also recruited Greg Jania, a former executive with Chicago-based fund of funds WP Global, as head of private equity fund investments.

APG and fellow Dutch pension administrator PGGM sold fund of funds manager AlpInvest (which ran private equity for the two institutions) to The Carlyle Group in 2011. After the sale, PGGM said it would build up its own internal capabilities around the asset class. But APG declined to discuss its strategy – until recently, when it revealed that it was building its own internal private equity team in New York.

“In the future, APG will address some segments of the private equity market using its internal management team, but will continue to partner with AlpInvest for other parts of the programme,” an APG spokesperson told PEI. APG has already committed the €10 billion it promised to AlpInvest as part of the Carlyle deal.

In addition to APG, there’s also the Abu Dhabi Investment Authority, which this year recruited Craig Nickels, the former head of private equity at the Washington University Investment Management Company, as head of US fund investments in its private equities department.

The trend of big institutions bolstering their direct (and co-)investment capabilities is likely to continue. But as these recent hires prove, even those institutions with the scale and resources to do direct investing still believe in the benefits of being a traditional private equity LP.