SINGULAR PARTNERS

By steering clear of the crowds, focusing on young portfolios and targeting fast-growth markets, Partners Group is demonstrating it has its own take on the private equity secondaries market.

“Large but not too large” summarises the fundraising plans of Zug, Switzerland-based alternative assets manager Partners Group, which has launched its second global secondaries fund with a target of €800 million ($936 million).

The fund target is considerably more substantial than the firm's debut €580 million vehicle, which closed as recently as September 2004. Stefan Nöf, head of Partners' London office, says the reason for this is to avoid the hassle of having to come back to market every year for successor funds.

On the other hand, adds Nöf, the target size is sufficiently small to keep Partners out of the mega-secondaries league occupied by the likes of Coller Capital and CSFB Private Equity (whose latest vehicles garnered $2.6 billion and $2.4 billion respectively).

The Swiss firm views the upper end of the market as rather crowded, and pricing pressure uncomfortably intense. Hence, many potential investors are likely to end up disappointed. According to Nöf, the debut 2004 fund received written demand of around €1 billion – and this time around, it is likely that only existing investors need apply.

The Partners strategy includes an emphasis on managed secondaries, i.e. acquiring fledgling portfolios between two and four years' old, which are theoretically on the cusp of ascending the J-curve.

It also involves seeking out value opportunities around the world. This led the firm to launch an office in Singapore at the end of 2004 with the aim of identifying hidden gems in Asia. “We've bought into Asian venture, where there are some great companies, but very few others have been doing that,” says Nöf.

If the proof of the strategy is in the returns, then it seems pretty viable so far. Nöf says the debut fund is fully invested and has already returned a cash multiple of 1.35 times committed capital.

CANDOVER 2005 CLOSES ON €3.5 BILLION
London, Paris and Düsseldorf-based LBO sponsor Candover has held a final close of its 2005 Fund with commitments of €3.5 billion ($4.1 billion), ahead of its target of €3 billion. According to the firm, the fund was raised in just over six months and significantly oversubscribed. Candover took commitments from 106 investors worldwide, including a €500 million investment from publicly-quoted investment trust Candover Investments. The 2005 Fund will follow a similar investment strategy to the Candover 2001 Fund, which is now fully invested, investing in mid-to-large buyouts across Western and Northern Europe.

STANDARD LIFE ADDS €1.23BN TO ASSET BASE
Edinburgh-headquartered Standard Life Investments (Private Equity) has raised €850 million ($1 billion) for its third fund of funds, European Strategic Partners 2004 (ESP 2004), and secured an additional €375 million through three separate accounts. ESP 2004 will invest in European buyout funds. Limited partners can choose to either have exposure to underlying fund investments only, or participate in a portfolio consisting of at least 70 percent funds and 30 percent direct co-investment. The closing takes Standard Life Investments (Private Equity)'s assets under management to €3.8 billion.

EQT MOVES INTO TURNAROUNDS
EQT, the Stockholm-based European buyout firm, is marketing a turnaround and restructuring fund to prospective investors. Senior partner Häkan Johannson is in charge of the project. According to market sources, the fund has a target of €250 million ($294 million) and will pursue equity investment opportunities in underperforming Northern European mid-cap companies. In its efforts to originate deal flow, the fund will be negotiating directly with creditor banks of target businesses. According to a Nordic institutional investor in private equity funds, the offering has met with strong limited partner demand, in part because the fund will not have any direct competitors, at least not in the near term. In addition to several LBO funds, EQT also manages a mezzanine pool of capital.

DBAG TARGETS €375M FOR FUND V
Frankfurt-listed private equity firm Deutsche Beteiligungs (DBAG) has begun fundraising DBAG Fund V, which has a target of €375 million ($441 million). If it reaches its target, it will be the firm's largest pool to date. Wilken von Hodenberg, spokesman for the board of management of DBAG, said the firm expects to hold a final closing by the spring of 2006. The new fund will continue DBAG's investment strategy of investing in companies with enterprise values of €50 million to €500 million in German-speaking countries. Typical equity investments for the fund will be somewhere between €30 million and €60 million.

EAST CAPITAL LAUNCHES RUSSIAN BANKING FUND
Stockholm-based East Capital has begun marketing a €300 million ($350 million) to €350 million private equity fund targeting the banking sector of Russia and the CIS. Once formed, the fund will be used to make 15 to 20 investments in established financial institutions with growth potential. According to East Capital founding partner Kestutis Sasnauskas, regulatory reforms and growing consumer spending are expected to propel growth in the fund's target markets. The firm currently has one investment professional in its Moscow office, but expects the headcount to grow to five as the fund develops.