Capital Dynamics to tackle US market

Preparing the launch of two new investment vehicles next year, the Swiss group behind Prime Edge Capital is building up its US presence.

Capital Dynamics, the Zug, Switzerland-based provider of structured private equity investment products, wants to significantly broaden its geographic reach and apply the securitisation technology it helped pioneer in Europe to the US private equity market.

The firm is best known for the creation in 2000 of Prime Edge Capital, the first private equity fund of funds Collateralised Debt Obligation (CDO). Prime Edge was the first private equity fund of funds securitisation using leverage and to obtain a stand-alone credit rating from Standard & Poor’s. It raised E150m to invest in European private equity partnerships.

According to William McCoy, who will run Capital Dynamics’ US arm, the firm is currently preparing the launch of two new investment products for launch next year. Declining to provide details regarding the group’s strategy, McCoy said the new products would be very similar to Prime Edge, except that the bulk of the capital raised in future will be invested in the US.

McCoy added: “To help us attract both debt and equity capital, we have signed a letter agreement with an international investment bank to assist us not simply with the placing of the products, but as a universal service provider.”

Prime Edge is one of a small band of structured products specialists in private equity looking to offer both long- and short-term investors access to private equity. “Prime Edge was a great success, but we can’t afford to be sitting on our laurels. We want to be first movers in finding new ways of utilising CDO technologies in private equity”, said McCoy.

Reclassifying private equity, which was fast becoming increasingly mature and commoditised, as an asset class and making sure the rating agencies were comfortable with private equity-based products were big tasks, but greater transparency in the industry and support from general partners were conducive to progress, he added.

One area that the firm is particularly keen on at present is the secondaries market, partly because “many who thought they were long-term investors in private equity have realised that they aren’t”, McCoy said. “We have a very strong interest in secondaries at the moment.”

Capital Dynamics, which was set up in 1999, already operates a satellite office in New York. It expects a fully fledged US arm will be up and running within the next three to six months. Initially the firm is looking to assemble a team of up to ten professionals in New York and in so doing match the size of its Zug-based arm. Additional resources are to be added to the US office at a later point.