Side Letter: GPs’ alts optimism; ELTIF how-tos; Armen’s London landing

GPs aren't fretting about recent fund performance. Plus: how to launch your first ELTIF; and Spain's Artá holds a massive first close. Here’s today's brief, for our valued subscribers only.

Just happened

Alts managers: bullish on performance despite headwinds (Source: Getty)

Reading the room
Alternatives managers have been largely happy with their performance in spite of last year’s troubled waters. That’s according to the Crestbridge Alternative Managers’ Mood Index, out this week, which found that 84 percent of GPs report positively on their portfolio performance over the past year, saying their results either exceeded (21 percent), met (42 percent) or partly met (21 percent) their expectations. Respondents included a mix of private equity (38 percent), venture capital (33 percent), real estate (23 percent) and other alternatives managers, mostly from Europe (74 percent), with just under one-fifth from North America (18.5 percent).

The CAMMI survey also measures the predicted direction of allocations in PE and real estate, with this year generating an overall score of 53.85. This is on a scale of one to 100, where a figure above 50 suggests there will be an allocation increase and, below 50, a decrease – the further away from 50, the greater the change in either direction.

This year’s result shows GPs generally expect to lean more heavily into European PE, real estate and private debt in the coming 12 months. The largest allocations that fund managers are considering for 2023 are in private debt and growth capital, with index readings of 71.43 and 66.67, respectively. In contrast, buyout strategies may see a drop in allocations, receiving a score of 40.

Difficulties remain. At 36 percent, talent was identified as among the biggest obstacles, with managers expecting fallout from the Great Resignation to linger on into 2023. Meanwhile, more than one-fifth found operational efficiency – ie, streamlining processes, improving communication within the business and finding ways to reduce costs – a challenge.

“It is clear that alternative investments faced some significant challenges in 2022, given the macroeconomic environment,” Alex Di Santo, group head of PE for Crestbridge, said in the report. “Whilst these challenges won’t disappear in 2023, fund managers remain optimistic about the asset class.”

So, you want to launch an ELTIF?
If you’re a manager thinking about whether the European Long-Term Investment Fund for you, Invest Europe’s new guide is a must-read. The 22-page, members-only manual outlines steps to consider before using an ELTIF.

“Overall, setting up an ELTIF should not be seen as a different experience as marketing any type of AIF as an AIFMD regulated entity,” the guide notes. “This said, there are undeniably additional conditions on investments – not least the need to invest at least 55 percent of the ELTIF capital into eligible long-term assets – as well as operating conditions – for example on borrowing.”

The document answers key questions, such as whether funds of funds can be ELTIFs (they can); the rules on portfolio diversification and maximum concentration; the requirements for marketing to retail clients; and whether ELTIF shares can be sold on secondary markets. This follows an overhaul in ELTIF regulation this year, which is helping to propel this inclusive fund structure into the mainstream.

Armen’s London landing
European GP-stakes firm Armen is set to open a London office, with further hires to come, Side Letter can reveal. The firm, founded by ex-Ardian top exec Dominique Gaillard, and Laurent Bénard, who spent 17 years at Capza, is targeting €400 million for its debut fundraise with a €500 million hard-cap, Private Equity International previously reported.

Armen’s Thierry Baudon, founder and former managing partner of Mid Europa Partners, will be joined in the London office by Catherine Haumesser, who moved to the firm last year from Larchpoint, a single-family office, where she was a partner overseeing its management and investment strategy, as well as its European investment activity. Prior to that, she spent more than 15 years with legacy SVG Capital.

Another front office hire will join in mid-June and more members of staff could follow. “A presence in London is a natural early step in Armen’s evolution, given the UK’s dynamic private capital ecosystem with lots of high-quality mid-market GPs,” Bénard, Armen’s chief executive, tells Side Letter. “Catherine brings with her a wealth of experience and an important LP perspective to our team, and we look forward to expanding our local teams across Europe further over the coming months.” Armen is looking to hire in the Nordics, Benelux, Switzerland and Southern Europe as well as Germany this year.


The Artá of fundraising
Iberian PE shop Artá Capital Partners has held a first close on its first fund as a fully independent manager, per a statement seen by Side Letter. Artá Capital Fund III has so far raised €305 million against a €400 million target. Madrid-based Artá Capital was previously backed by Corporación Financiera Alba (Grupo March) and various Spanish LPs, and became an independent manager in June 2021. The firm raised €400 million for its Artá Capital Fund II in February 2018, according to PEI data.

Artá, which has engaged Asante Capital Partners on its latest fundraise, focuses on investing in family-owned, mid-market companies across Spain and Portugal. The firm was named as one of Private Equity International‘s ‘Five European GPs to keep your eyes on‘ in 2021 for its notably strong track record; at the time, the firm was understood to have already delivered in excess of 2.5x and a 30 percent internal rate of return for LPs from its Deyá Capital, a €400 million, 2011-vintage, and Artá Capital Fund II.

Sun’s rise
US buyout firm Sun Capital Partners has raised at least $1.4 billion for its Sun Capital Partners VIII, according to a regulatory filing. The fund, which has a $2.5 billion target, launched in 2021, according to PEI data. The Boca Raton-based firm raised $2.3 billion against a target of $2.2 billion for predecessor Sun Capital Partners VII in 2019.

Sun Capital invests between $50 million and $400 million equity tickets into businesses operating across business services, consumer, healthcare, industrial and technology sectors, according to its website. The firm also has a strong focus on add-on acquisitions, which have made up around half of all deals it has done across its history. It has an office in New York and an affiliate – Sun European Partners – with an office in London.

Sun Capital Partners has been exploring a process to allow investors in Fund VII as well as Sun Capital Partners VI to cash out of their interests, our colleagues at Buyouts reported (registration required). The process also would include a staple of fresh capital into Fund VIII. Sun Capital is no stranger to such transactions, having also run a tender process on Fund VI in 2019, affiliate title Buyouts reported at the time (registration or subscription required).

Today’s letter was prepared by Alex Lynn with Carmela Mendoza, Helen de Beer and Madeleine Farman