On the back of improved market conditions allowing European private equity firms to step up their exit activity, London-based fund of funds manager SVG Capital has reported a strong improvement in distributions received from underlying partnership investments.
During the first six months of 2004, the listed specialist asset manager received a total of £69.4 million (€101.8 million; $124.6 million) in distributions, compared to less than £4 million in the same period the previous year and £30.2 million for the whole of 2003. These distributions, the firm said in a statement detailing its un-audited interim results, were at an average 63 percent increase on December 2003 valuations.
SVG also reported that the performance of its underlying portfolio of private equity funds improved as well, with fund managers writing up a number of portfolio investments including SEAT Pagine Gialle (part-owned by Permira) and Eyetech Pharmaceuticals (Schroder Ventures Life Sciences).
Both developments contributed to a 4.7 percent increase in value of SVG’s 127-strong portfolio of companies in local currency. This was in part offset by negative foreign currency fluctuations, meaning that net asset value increased by 1 percent to £532.5 million, or 463.4 pence per share on a fully diluted basis.
In the press statement accompanying the 6-month figures, SVG said market conditions for private equity firms remained favourable, particularly with regards to exits. “Realisations in the six months have been through a number of routes with many private equity investors taking advantage of the improved capital markets and returning cash to investors via recapitalisations and new listings. More recently, uncertainty in the capital markets has re-emerged and thus has led to more difficult conditions for new issues, although the scope for trade sales and recapitalisations remains.”
Regarding new fund investments, SVG said it was currently considering commitments to Schroder Ventures US Fund II, a US mid-market investor, as well as The Japan Fund IV.
In April, the group’s fund advisory arm, SVG Advisers closed Schroder Private Equity Fund of Funds II on €285 million, of which €95 million has been invested in eight partnerships in Europe and the US.
SVG Advisers is currently marketing SVG Diamond, an innovative collateralised fund obligation backed by investments in private equity funds. The €400 million deal is expected to close this autumn.