No new 3i buyout fund, boosting debt and infra

The asset manager’s third party private equity assets under management fell as the firm had a strong year of realisations while future growth is will be focused on the debt and infrastructure strategies.

3i Debt Management increased its assets under management to £7.24 billion ($11.4 billion; €10 billion) a 12 percent year-on-year increase over the 12 months ending 31 March 2015. The debt division is now the firm’s primary third-party fund management business, said 3i chief executive Simon Borrows during the results presentation where he also announced that the firm would not raise a new private equity buy-out fund. 

Burrows also announced that the firm had successfully completed its three-year business restructuring programme and had met all targets it set itself in 2012 including reducing debt. Net gearing fell to zero as of the end of March. 3i reported a net cash position of £49 million, up from a negative cash position of £160 million a year earlier and negative £464 million for the 12 months ending 31 March 2012. 

Total return on equity for all three platforms; private equity, infrastructure and debt, reached 20 percent. The firm announced a dividend of 14 pence per share bringing the full year dividend to 20 pence per share. Operating cash profit was £28 million, up from £5 million a year earlier. Overall AUM increased 4 percent to £13.5 billion.

The debt management business structured six collateralised loan obligations over the 12 months while fee income increased from £32 million to £34 billion. 

PRIVATE EQUITY

The firm took advantage of a strong exit environment in 2014 to realise £831 million through exits. Burrows said that the firm has sold the majority of its weaker investments and the remaining 65 portfolio companies are mainly made up of its strongest performers. 

The 19 full realisations over the full year ending 31 March 2015 generated a 2x money multiple over cost, the firm said.
While 3i will not raise a new buy-out fund, it will continue to invest proprietary capital in mid-market companies in its core regions of Northern Europe and North America. 

As well as completing the overall business restructuring plan, Burrows announced that competition in the infrastructure market had prompted 3i to reduce its infrastructure return objective from 10 percent annually to a revised target of between eight and 10 percent over the medium term. The infrastructure dividend target was also de-linked from opening net asset value.