Since August 2007, most larger private equity firms have seen their investment pace slowed or halted, but 3i has shrugged off turbulent market conditions to say it is confident it can nearly double assets under management by 2010 to €20 billion ($31.5 billion).
The firm will need to continue increasing its growth in assets under management, which increased by around 70 percent from the end of March 2006 to the same period in 2008.
3i believes it can do this because of the international repositioning of its business. The firm has shifted since 2004 from a UK-biased mid-market buyout, venture and growth capital focus to a fully globalised investment programme across growth capital, infrastructure, midmarket buyouts and listed private equity.
The firm has gradually abandoned early-stage venture since 2004 and incorporated the venture capital team into the growth capital arm. Patrick Dunne, 3i's director of communications, says: “The key is we've transitioned that business from early to late stage.As businesses have become more international the overlap between late stage and growth capital has become quite high.” As yet, the firm invests in growth capital from its balance sheet, but is considering raising third-party capital for this activity.
Infrastructure provides the group with a presence in one of the few investment areas where leverage is available in relative abundance. All its various business lines tap into rapidly growing emerging markets, which seem to be relatively undiminished by the economic problems in Western markets – thus far at least.
Although 3i's diversification appears to leave it well positioned, the group's share price is trading at a discount to net asset value approaching 20 percent (£8.70 per share at press time).
The firm is adamant its share price woes are more due to worldwide macroeconomic problems than any questions about its performance. Dunne says: “We're singing a great song but nobody's got the radio on.”
PAI DOUBLES UP
PAI Partners, the French buyout firm headed by Dominique Mégret, has closed its latest European fund on €5.4 billion ($8.5 billion) at double the size of its previous fundraising in 2004. Mégret said the firm had targeted €5 billion although its hard cap had been higher at an undisclosed amount. He said he did not want to continue fundraising for an extended period of time and it was better to raise an appropriate amount to invest. Around 130 investors from 23 different countries invested in the fund. Nearly two-thirds of investors came from Europe, 26 percent from North America and 11 percent from Asia and the Middle East. PAI's existing investors, which significantly increased their average commitment size, accounted for more than 70 percent of the fund.
SECONDARIES FIRM MAKES FURTHER HEADWAY
Headway Capital Partners, the UK secondaries firm which span out of secondaries giant Coller Capital, has closed its second fund at its hard cap of €150 million ($233 million), exceeding its target of between €100 million to €120 million. The fund is nearly triple its €52 million first fund raised in June 2005. All investors in the debut fund also committed to the second fund. The company pursues investments including limited partnership positions in private equity funds, portfolios of direct private equity investments and minority positions in single companies. The firm received all its investments from family offices or high net-worth individuals. Headway was founded in early 2004 by Laura Shen Lefranc, Christiaan de Lint and Sebastian Junoy, all formerly of Coller Capital. The firm said in a statement it differentiates itself from other secondaries buyers by focusing on smaller transactions.
LPS WARM TO AL GORE CLIMATE FUND
Generation Investment Management, an environment-focussed investment firm chaired by former US Vice President Al Gore, has closed its second fund on $683 million (€439 million). Riding a wave of increased investor appetite for greentech vehicles, Generation's Climate Solutions Fund will make investments of between $25 million and $30 million in a mix of private and public companies developing solutions to global warming, including technological advances in renewable energy, building efficiency, fossil energy, sustainable agriculture and carbon markets. London-based Generation will invest the fund in 10 to 15 private companies, the same number of small public companies ripe for take-privates, and a small number of large public businesses, according to a Generation spokesman.
€75M FLOWS TO FOUNTAIN FOR BIOTECH DEALS
Fountain Healthcare Services, the startup Irish biotech investor, has held its first close on €75 million ($117 million), nearly doubling its first close target of €40 million. It is setting its sights on a final close of more than €100 million. Fountain was founded by Manus Rogan and Aidan King, both formerly part of the venture group at Elan Corporation, a US NYSE-listed biotech company. Rogan spent the last seven years screening and managing investments in private and public biotechnology companies. King was one of the founder members of Elan's venture group in 1998, leaving in 2004 to join Bio-IB, a US healthcare investment bank. Fountain will invest between €500,000 and €7 million per company. It will not invest in early stage biotech. The strategy echoes veteran biotech venture capitalist Sir Christopher Evans' move away from funding early-stage research, which was announced last month.
DIVERSIFICATION DRAWS INVESTORS TO WARBURG PINCUS
Warburg Pincus has held the final close of its 10th global fund on $15 billion (€9.4 billion) beating its target of $12 billion by 25 percent. The firm held its first close for the fund on $9 billion in October. Warburg Pincus' previous fund raised $8 billion in August 2005. Investors included public and private pension funds, endowments and global financial institutions such as the Washington State Investment Board, the US pension fund, and GE Asset Management, the asset management arm of General Electric. First-time investors included UK pension fund Universities Superannuation Scheme and the Teachers' Retirement System of Texas, a US pension fund. The successful fundraising is another instance of limited partners backing the asset class despite worries raised by the credit crunch.Warburg Pincus invests in venture as well as growth capital and later-stage investments. It has also diversified into emerging markets by investing in Central and Eastern Europe, China and India. The firm makes more than 40 percent of its investments outside the US. As a private equity investor it went global early on, opening a London office in 1987 and a Hong Kong office in 1994.
FRENCH TURNAROUNDS IN THE PICTURE AS VERMEER NEARS FINAL CLOSE
Vermeer Capital, a newly formed French turnaround investor, has held a first close on €75 million ($117 million) for its first fund after seven months of fundraising, according to Olivier Elmalek, a partner at the firm. The firm aims to hold a final close on €90 million within the next three months. The team setting up the fund provided 10 percent of the total capital, according to Elmalek. He said the large management contribution was designed to allay potential investors' worries about a first-time team.
The remainder of the capital came from institutional investors such as Allianz Private Equity, the captive arm of the insurance group, as well as private individuals. The firm was founded by Jean-Louis Detry, who has led several turnarounds, including Disques Vogue, the first independent French record company, and Datacine Group, a cinema postproduction company bought out from Vivendi Universal.
SUMMIT HAS €1BN WAR CHEST FOR EUROPE
Summit Partners, the global private equity firm based in Boston, has raised €1 billion ($1.6 billion) for its first European equity fund, reaching its hard cap, according to Scott Collins, a managing director at the firm. It has also closed an $825 million subordinated debt fund, its fourth, which will provide equity and mezzanine debt financing to companies in North America, Europe and Asia. Summit targets equity injections of $5 million to $500 million per transaction and has the ability to invest more than $800 million in combined equity and subordinated debt in a company. The subordinated debt fund can co-invest alongside all Summit funds.