Fund of Funds Special: Niche players

ROBECO PRIVATE EQUITY (ESG/CLEANTECH)

Netherlands-based Robeco Private Equity’s fund of funds programme focuses on clean technology and responsible investing using two strategies: a general private equity fund of funds with a strong emphasis on environmental, social and governance practices and a separate fund of funds vehicle dedicated to clean technology.

The programme was launched in 2004 by Andrew Musters, Robeco’s global head of private equity.

“We are among the first to integrate ESG into private equity and also among the first to launch a dedicated clean tech private equity fund of fund offering,” Musters says.

Last year, the firm closed its Robeco Responsible Private Equity Fund II on $100 million and its Robeco SAM Clean Tech Private Equity III fund on $250 million.

“When we started, there were fewer than 100 [cleantech] funds, of which more than half were not of institutional quality,” Musters says. “I think now we have around 400 dedicated cleantech funds in our database, so this universe has grown tremendously over the past six years.”

For Robeco, manager selection involves scoring firms based on ESG-related issues, such as how private equity funds deal with issues like trade unions, labour relationships and health and safety.

“Institutional investors like private equity, but they don’t like the ruthless capitalist nature of it. So they want to see private equity being executed in a responsible way.”

JADE INVEST (CHINA)

Jade Invest bills itself as the first private equity fund of funds manager focused exclusively on China.

The firm was founded in 2005 by Sweden-born managing director Ludvig Nilsson, a former strategy consultant at Pricewaterhouse Coopers. Jade Invest manages two fund of funds: Jade China Value Partners, a $100 million vehicle, and Jade China Value Partners II, which is currently in market targeting $400 million.

“We invest only in China-dedicated managers, but offer a diverse portfolio exposure across China’s private equity market by stage, vintage, industry and region,” says Jade Invest associate director James Cen. “Although our portfolio spans the range of private equity here in China, we have a heavier weight towards growth stage and emerging/smaller managers.”

Jade’s first fund of funds invested in 13 partnerships and the firm plans to invest in between 12 and 16 managers with JCVP II.

“The majority of our work is not at the fund manager level but at the underlying portfolio company level,” Nilsson told China Central Television in 2011. “Our efforts are mostly spent on assessing the underlying portfolio companies’ situation and the genuine reasons for their success or failure.”

In addition to fund investing, the firm also does co-investments and secondaries.

OCROMA ALTERNATIVE INVESTMENTS (LATIN AMERICA)

Despite the rush of GPs into Latin America making primary investments during the past few years, private equity fund of funds is a new concept in the region.

Founded in 2008 by managing partner Leonardo Ribeiro, former head of research at the Private Equity and Venture Capital Research Center at Fundação Getulio Vargas, Brazil-headquartered Ocroma Alternative Investment manages the first such fund of funds in Brazil, according to the firm’s website.

Ocroma provides local and foreign limited partners with exposure to alternatives in Brazil and other countries in Latin America, and invests only in Latin America-based general partners, making co-investments alongside the funds. Ocroma Private Equity Portfolio (OPEP) invests in country-specific funds and regional funds in Latin America, with a core position in Brazil, and invests between $5 million to $15 million per transaction.

MB GLOBAL PARTNERS (DEBT)

Former Siguler Guff portfolio manager Maria Boyazny founded MB Global Partners in autumn 2010 to focus on credit and distressed opportunities.

Boyazny previously spent 13 years running Siguler Guff’s four distressed opportunities funds, managing $4.5 billion in assets.  MB Global continues the thesis Boyazny pioneered at Siguler Guff: operating a multi-manager platform focusing on a number of credit dislocation and distressed strategies.

“What we offer is a comprehensive way for institutional investors and family offices to take advantage of all areas of credit dislocation,” Boyazny says. “There are times when you should buy more liquid paper, such as high yield, leveraged loans etc., but then there are other times when those securities are trading too tightly and the opportunity is in other parts of the market. It could be in more niche and special situation strategies, or in European bank liquidations or some of the other areas of opportunity.”

MB Global plans to commit to between 12 and 15 relationships with its first fund, or roughly five per year. Up to 40 percent of the fund will be used for direct investments, with a similar proportion committed to managers outside the US, particularly in Europe. “It’s about being tactical,” she says.

MULLER & MONROE (EMERGING/NICHE MANAGERS)

US-focused Muller & Monroe operates a fund of funds focused on emerging managers, and has separate accounts with special mandates such as investments in women and minority-owned private equity firms.

Founded in 1999, the firm is run by president and founder André Rice, a former M&A executive at Kraft and founder of Rice Group, an investment platform for wealthy individuals; along with managing director and chief investment officer Irwin Loud III, the former head of private equity at the Florida State Board of Administration. At Florida, Loud helped launch the first programme focusing exclusively on co-investing.

Muller & Monroe invests in lesser known private equity groups, such as former captive spin-outs from insurance companies, and has committed to 26 firms in total.  “We define ourselves as emerging and niche, so it’s smart investors operating in their relatively new platforms,” Loud says. “We are heavily focused on growth equity and lower middle market buyouts. We’ll do a little bit of mezzanine, and would consider distressed and other eclectic strategies.”

The firm has $458 million in assets under management.