Torben Vangstrup
CEO, ATP Private Equity Partners
• Location: Copenhagen
• Invested assets: DKK592bn (€79.3bn)
• Danish labour market supplementary pension
• DB scheme

We started as a fund-of-funds investor in 2001. We invest alongside external general partners (GP) who are then responsible for the company selection. What we are looking for in a GP is a team that has been together a long time, has followed a strategy – which we believe is going to be viable, going forward – and is investing in a way that demonstrates a clear process. That way, we have some comfort that they are doing what is needed from a tax and legal point of view.

We have €7.7bn in assets, as we have recently raised our fifth fund with an €800m commitment from ATP. It is going to be very similar to the prior four funds, actually, from a strategic point of view. The lion’s share is going to be invested in buyout funds – around 70% – and then we will also invest in some venture and distressed funds. Finally, we will set aside around 10% for co-investments, primarily with buyout funds.

Our first fund, launched in 2003, stands at 14.5% net internal rate of return (IRR) and funds two and three are both above 10% net IRR. Those funds, because they are from 2005 and 2007, are still increasing net IRR. You could say that fund one is now mature, and I would also say that you can expect 14.5% to be very close to the final outcome for funds two and three.

The fact that the team and I are not spending any time on fundraising is definitely one reason we have been successful.

We have had the opportunity to focus entirely on getting our investment process, our strategy and our team in place to find the right investment opportunities. We have a team of 17 – five of those are in our New York office, which we set up in 2007. The office launch was a reflection of the fact that half of our commitments since 2003 have been split evenly between the US and Europe. The split occurred unintentionally, as we look for good opportunities and for managers we believe are going to outperform.

Having said that, if you look at 2013, we only invested in US funds – we were not able to find anything in Europe that made us deploy any capital. It was a reflection of the US market being more active, and I don’t think the quality we were looking for, around the managers, was available in Europe last year.


South Yorkshire
Pensions Authority
John Hattersley
Fund director
• Location: Barnsley
• Invested assets: £5.5bn (€6.6bn)
• Members: 133,000
• DB, split between final salary and career average

At present, the South Yorkshire Pensions Authority has around 5% of assets invested in private equity, which we regard as a standalone asset class. I do not think it is a true diversifier because so much of the pricing is controlled by, or referred to, public equity pricing. However, we see it as one of the few asset classes where you get rewarded for your illiquidity and, over time, it does prove its merits within the broader portfolio.

We are fairly agnostic as far as our strategy is concerned, and do not follow any particular portfolio theory. We would not insist on having 0.5% in North American healthcare, for example. We have tended to follow individual managers or firms, but we do have a regional overlay and a mid- and large-cap overlay.

It would be wrong to say that we don’t take note of track records, but what you want to look at is the stability of the team, how they complement each other and try to assess if they will still be in place in five years’ time. Succession planning and cohesion is perhaps more important than any other investment decision, because private equity is very much a people business – you’ve got to have confidence in the team as a whole.

I suppose we tend to focus more on the mid-cap area rather than the very large funds and we probably have a bias towards less established managers. That is not to say that we do not have some big name managers in the portfolio as well.

Because we are a relatively small player, we do not think we should just play it safe and have a shotgun approach where you give a certain amount to the Blackstones of this world.  Our view tends to be that we should try and cherry pick managers, we should try and be smarter than the average fund and follow the people we like.

We do not run private equity in-house at the moment, despite being authorised to run the scheme’s assets internally. We did about a decade ago, but we now follow a straightforward approach and invest in other people’s partnerships as a limited partner. There are times when we will invest in funds of funds, because we will want a broader exposure, or where the due diligence cost is such that we will pay higher fees and get a fund-of-funds manager to do the work.


The Netherlands
Xander den Uyl
• Location: Heerlen
• Invested assets: €6bn
• Members: 100,000
• Scheme for disabled workers
• Funding level: 109.6% (February 2014)

We have about €6bn in assets and have committed about 2% to private equity – which has not all been drawn down. We have four funds in total, all managed by F&C, our fiduciary manager. They advise us on the investment decisions, but the decisions themselves are not delegated to them.

Our private equity portfolio consists of one older European mid-cap fund, as well as a climate opportunity and a secondaries fund, which has been highly profitable for us. We have also recently entered into a new mid-cap fund. So far, we have only invested in European private equity.

The rationale behind the climate opportunity fund is that we believe climate change is an important factor, and will continue to be, for long-term investments. Responsible investors should also look into the opportunities that climate change can offer in the long run.

There has been a real debate within the fund about whether to grow our private equity exposure or not. The percentage we have now is really too small. Either we slowly dissolve our private equity interests or we grow them. Our main problem is that we feel that, at present, the market is not best suited to a relatively small fund such as PWRI. You should really ask yourself whether or not you can deliver the long-term return you are aiming for. It’s quite a debate at the moment.

From the perspective of our investment beliefs, we believe in the premium from illiquid investments such as private equity, but the cost structure and transparency make it very hard for us to invest. The debate is not over, and we wonder whether or not we should change our policy.

We are discussing whether we should invest in some specific small-cap funds. Our private equity is in European small- and mid-caps, but could we not get the same kind of returns if we went into publicly listed small- and mid-cap funds? That has its own problems, so we really have not yet finished our internal debate.

PWRI has a specific group of beneficiaries, and we probably will not get any new beneficiaries in the future. As a result, the fund is really looking at its future and asking itself if it is going to merge with other funds, or is it going to remain as a standalone, closed fund.