FRANCE – The French €10.2bn pension fund UMR is looking to increase its allocation to private equity, structuring deals without the help of fund managers that "traditionally require excessive management fees".
Chief executive Charles Vaquier told IPE the pension fund was currently in talks with the DLJ Group in the Nantes region, where UMR is based.
UMR is seeking to invest as much as €10m in DLJ, which owns hotels and cosmetic, naval construction and agriculture companies.
"We are currently looking at the group's balance sheets and its growth potential over the next years to make sure whether DJL can expand its activities and create new jobs," Vaquier added.
Philippe Rey, the new CIO at UMR, went on to say that the pension fund was in the process of structuring the private equity deal with the help of a French bank, through the intermediary of UMR's lawyers.
"First, this will enable us to receive a guaranteed return over seven years and know in advance what return to expect," he said.
"Second, it will enable us to avoid paying all the excessive fees a traditional private equity fund manager would require to structure the deals and find the companies in which to invest."
Rey added that, once the deal was structured with the bank's help, UMR's lawyers would define the collateral the DLJ Group would be required to post in the case of a default.
"The collateral posted by DLJ will be mainly under the form of real estate assets owned by the group," he added.
"We will then, once a year, check the group's cash flow to make sure it can expand its activities."
According to Rey, the demand coming from local companies directly relates to the lack of financing provided by traditional lenders such as local banks, which are currently facing regulatory issues.
In a previous interview with IPE, Vaquier complained about the application of Solvency II capital rules to pension funds, which he said would impact investment in French private equity "deeply".
He added at the time that Solvency II could curb institutional investors' appetite for private equity, while the capital requirements stemming from Basel III meant banks were largely unwilling to provide funds for such companies.
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