Wellcome: European funds to face tough times

The £13bn endowment is shifting its focus away from Europe and the traditional limited partner model.

In a move that could dismay GPs on the continent, the Wellcome Trust, a £13 billion (€15 billion; $21 billion) European scientific endowment, is pointing its private equity investment strategy away from Europe in light of poor growth prospects.
“We are focused very little on economic growth and multiple arbitrage opportunities,” said Robert Coke, head of absolute return and buyouts at Wellcome, adding that the trust is exploring more options in emerging markets and niche strategy funds, such as those targeting the energy, technology or education sectors. He cited the trust’s undrawn exposure to existing European funds as another factor deterring it from making more commitments.

Robert Coke

Coke was speaking at the 2010 BVCA Summit in London on Thursday as part of an onstage head-to-head discussion with Lionel Zinsou, the chief executive officer of PAI Partners, on the subject of fundraising.
Coke elaborated that Wellcome is now being an “awkward” customer for fundraising GPs, as it is less-and-less conforming to the traditional limited partnership model and favouring more customised investment methods, such as managed accounts.
Zinsou, whose firm invests on a pan-European basis but is not currently fundraising, defended the continent’s credentials as a destination for investment. “European companies are doing better than Europe,” he said, explaining despite the low growth environment, there are companies based in Europe which can and are benefitting from growth elsewhere in the world, because they have either world-leading technology or world-renowned brands.
As an example he pointed to United Biscuits, a consumer foods company and PAI portfolio investment. “Jacob’s Crackers and McVitie’s [two traditionally British brands in the UB stable] mean something in Asia,” he said. PAI and Blackstone Group, who co-own the asset, are in talks to sell United Biscuits to China’s Bright Food Group for more than £2 billion (€2.3 billion; $3.2 billion), according to the Wall Street Journal.

Zinsou echoed the idea that limited partners in general are pushing for different structures, particularly those based in emerging markets.  “Yes, we are seeing this trend everywhere,” he said. “In the new world there is not the legacy of code of practice [as there is in the US and Europe]. They are not playing by the same rules.”