Standard Life Investments, the Edinburgh-based fund manager, has launched a £160m investment trust aimed predominantly at mid-market buyout and expansion finance opportunities in the UK and continental Europe.
The trust intends to invest in some 35 private equity funds and aim for a broadly diversified portfolio in terms of industry sectors, geography and investment stage. Up to 20 per cent of the capital can be allocated outside Europe.
Commenting on the reasons for setting up the trust, Currie told PEO: “We were aware that a listed vehicle would be attractive to investors who are keen to get into private equity but are not comfortable with investing in limited partnerships.”
“We also had recognised for a while that an investment trust has a number of attractive features, such that capital gains roll up gross of tax and can be reinvested. And you can leverage a trust, which has certain advantages in terms of how you operate it”, Currie said.
One disadvantage of a listed trust Standard Life wanted to work around was that had it raised 100 per cent of the capital on day one, performance would have got off to a slow start because of the time it takes to deploy new cash. “The solution that we came up with was to transfer what we class here as the legacy portfolio of fund investments of Standard Life into the trust for which Standard life receives equity in return”, Currie explained.
Once the transfer is completed, Standard Life will hold just over 50 per cent of the trust’s shares. Assets invested in 19 private equity partnerships are being transferred, including investments in Apax Partners, Candover and CVC Europe. Commitments worth an additional £79m have been received from outside investors.
Standard Life Investments’ private equity division has over £700m under management. In October 2000, the group closed European Strategic Partners, an E868m private equity fund investing in other private equity funds as well as making direct investments.