SVG makes co-investment push

SVG Capital, a London-listed fund of funds, is ramping up its co-investment activity as it continues its diversification push.

The firm has completed three co-investments so far this year: it acquired The Hillman Group alongside New York-based CCMP Capital, invested in TeamViewer alongside Permira and co-invested with Cinven to acquire Visma, the firm said in its half year results on Monday.

“We don’t have a target per year; we are looking to build up a portfolio of 10 to 12 co-investments over the course of three years,” Lynn Fordham, chief executive of SVG told Private Equity International.

The firm, which historically only backed Permira funds, has recently adopted a co-investment strategy. “It is new to SVG, because when we were Permira-focused investor we didn’t co-invest,” she said, but added that SVG’s team has “significant experience in direct investing.”

SVG has been adjusting its investment strategy in recent years after shareholders voted for a diversification push in 2012. Instead of only backing Permira, SVG said it would expand the number of its GP relationships. The new strategy is “really starting to gather pace,” Fordham said.

SVG made a $150 million commitment to CCMP Capital’s third fund, which focuses on mid-market buyouts and growth capital investments in the US and Europe. SVG has now backed four GPs in total having previously invested in Clayton, Dubilier & Rice Fund IX, Fifth Cinven Fund and Permira V.

The firm aims to back approximately eight European or US-focused GPs in total, Fordham said. “We don’t have a target of how much we will want to put to work in one year. If a manager we want to commit to isn’t fundraising for another 18 months, then we will wait 18 months for that manager. Private equity is all about backing the best managers to generate the real outperformance of the market.”

During the first half year, SVG improved its net asset value by four percent, to 535p, the firm said. “We remain positive on the long term outlook for private equity, albeit we are cautious about pricing and leverage levels in certain areas of the market currently,” Fordham said.

Total capital calls were £78.6 million, while distributions were £92.5 million, due to the strong exit climate. Since June SVG’s distributions have risen to £116.6 million due to a number of Permira exits. Permira exited two businesses in full: Renaissance Learning, which was sold to Hellman & Friedman, and All3Media, to Discovery Communications and Liberty Global. Permira also partially exited Acromas, due to the IPO of The AA, as well as OdigeO, which listed in April 2014. The “significant level of distributions” enabled SVG to return £110 million to shareholders in the period, SVG said.