A smooth transition

Swiss fund of funds manager Adveq recently demonstrated that succession planning and its execution needn't be a painful exercise

When media outlets got wind of managing director André Jaeggi's departure from Adveq at the end of 2008 – as well as his subsequent founding of a boutique consulting firm – some automatically applied the “spinout” label to the news.

But Jaeggi's gradual withdrawal from the Zurich-headquartered fund of funds manager he built with Bruno Raschle and Peter Laib was not a spinout – nor was it by any means a surprise. The firm told its limited partners in its 2007 second-quarter report that Jaeggi – who was instrumental in establishing the firm's European investment platform and fine tuning its risk management and governance policies – intended to reduce his role at Adveq.

“A fund of funds has a 12-year life, and in 12 years I'll be well into retirement,” Jaeggi tels PEI. “This was the right time. It's normal to have the next generation take over and it's also a sign that Adveq is supposed to live on beyond its first generation. It's a company that is beyond people now.”

Jaeggi's departure coincided with a flurry of fresh fundraising for the 12-year-old firm, which has six managing directors. According to recent filings with the US Securities and Exchange Commission (SEC), Adveq has raised nearly $417 million for its fourth Europe-focused fund of funds, which the SEC filing notes has a $500 million target. It has also raised nearly $90 million on the way to a $425 million target for Adveq Technology VI and more than $61 million for its second Asia-focused fund of funds, which has a $350 million target.

While he is no longer involved in the day-to-day operations of the firm, Jaeggi remains a shareholder. He “still serves on the board of directors and is an active member of the company”, says Laib, who stresses that Jaeggi's newest venture does not compete with Adveq. “We're fully aware and have approved all his activities.”

In line with many alternative asset managers unwilling – or unable – to see retirement as a total withdrawal from the industries in which they worked, Jaeggi recently founded Ji Portfolio Services, which helps institutional investors evaluate risk correlations between the asset classes in their portfolios and restructure if need be.

“I'm still speaking with institutional investors, which is something I like to do, and [the work is] still long term – but the horizon is less than 12 years,” he says. Ji Portfolio Services lists Adveq and US-based consultant FS Associates as its partners.

Merrill Lynch, the investment banking group that was bought for $50 billion in September last year by Bank of America, has sold €150 million-worth of limited partner interests in Kreos III, a European venture debt fund. Five buyers bought stakes from Merrill Lynch in the €200 million fund, with New York-based secondaries specialist Paul Capital taking by far the largest. Merrill Lynch, which originally seeded the fund in 2007, is now the second-largest limited partner behind Paul.

Pomona Capital, the New York-based funds of funds manager and secondaries investor, has hired Oliver Gardey, a former partner at fellow fund of funds Adams Street Partners, to head its European operations. Pomona Capital has been without a European head since August last year, when European director and partner Brian Wright left the firm to pursue other interests. Gardey has spent the last six years at Adams Street Partners.

3i Germany is losing managing director and group partner Stephen Kruemmer due to “personal reasons”. He will be jointly replaced by current partners Ulf von Haacke and Peter Wirtz. Kruemmer joined the UK-listed private equity firm's Frankfurt operations in 2005 and has been credited with “successfully restructuring and repositioning” the business.

Andrew Hartley, one of the founding partners of Kleinwort Benson spinout August Equity, has left the firm to enter the secondary private equity market, joining direct secondaries firm Chamonix Private Equity. He joins Chamonix as a partner alongside founders Jane Crawford and Chris Edge. Chamonix typically acquires portfolios of private equity and venture capital assets from financial institutions.

Ukrainian investment banking group Dragon Capital is hoping to raise more than $100 million for its debut private equity vehicle. The Europe Virgin Fund will invest in businesses operating in the Ukraine, Moldova and Belarus in sectors such as retail, fast moving consumer goods, industrials, telecom, media, technology and pharmaceuticals.

Credit Suisse said it has “largely completed” the expansion of its asset management global institutional distribution team, which includes its private funds group, having brought in a total of 18 professionals. That includes nine managing directors, three of whom previously worked for other Credit Suisse divisions. Remy Kawkabani, formerly co-head of the bank's private funds group in London, assumes responsibility for the institutional distribution group in Europe.

A consortium led by The Carlyle Group and including fellow private equity firms GE Equity and Eqvitec Partners has exited its investment in Stockholm-headquartered mobile phone technology company SmartTrust in a trade sale to international technology group, Giesecke & Devrient. The consortium acquired a majority stake in the business back in 2002 for €35 million, at a time when then parent company, Sonera, was struggling to offload assets in the wake of the global crash in technology company valuations.

Damon Buffini, chairman of UK buyout giant Permira, has warned investors of tough times ahead, as the industry adapts to smaller deals, scarce leverage and increased regulation. “I have not experienced such a lack of clarity about the outlook in my career and there may be worse to come before we see a recovery,” said Buffini in a statement in Permira's 2008 annual report.

The private equity veteran warned that the current market turmoil would alter the private equity landscape. “The short-term outlook may be uncertain, but we can be sure that the current turmoil will bring lasting changes to our industry on a number of fronts,” he said. “It will, for example, be a very long time before the prefix mega is applied again to the industry's activity; investments will be smaller, albeit there will still be opportunities to invest in and transform many businesses.”