SWITZERLAND – The London Pension Fund Authority, Sweden’s AP3 and AP7, the London Borough of Hillingdon are among pension funds investing in the Crown Private Equity European Buyout Opportunities fund, which has announced its closing at 392 million euros.
The new fund of funds, which has already made commitments of 100 million euros, is managed by LGT Capital Partners, the Swiss-based alternative investment manager with four billion euros in assets under management. The fund focuses on small and mid-market buyout funds in Europe and expects to invest in about 20 funds when fully committed.
This is the largest of the funds of funds specialising in this area, says LGT partner, Tycho Sneyers, based in Pfaffikon. “We are concentrating on the smaller end of the buyout market.”
It would not be worthwhile for most pension funds to do the work of analysing small Italian buy-out funds, for example. “We have our investment team, with 14 nationalities in all, to do this work – the most international team in Europe.”
The new fund is interested in opportunities right across Europe and has made seven commitments across five countries Sweden, Germany, Italy, Poland and the UK. He reckons the potential number of funds available runs into several hundreds.
The reason for the investment interest is that by numbers, some 90% of European buyouts occur in the smaller to medium sized company buy-out space, says Sneyers. “This is in number terms and not in assets, which may amount to only 50%.”
Pension funds and other institutional investors, who make up the bulk of the investors in Crown, know they need to have exposure to this area “They require this in order to have a truly diversified private equity portfolio.”
LGT says it is looking for five percent return in excess of public market returns for this fund of funds. “We would expect it to be higher than a globally diversified fund of funds,” he says. “We do not see this area as being a higher risk are than others.”