European Fund Briefs, April 2011

Russia Dangles $10B PE Carrot

Russia is seeking to restore confidence among the global private equity community with the launch of a $10 billion co-investment fund.

Goldman Sachs has been tasked with leading the project, the Financial Times reports, and American private equity firms, including Apollo Management, The Blackstone Group and The Carlyle Group have already been approached, as well as several Middle East sovereign wealth funds.

Carlyle, reportedly, said it is uninterested in the new fund, a source told Reuters.

Carlyle pulled out of two Russia-focused funds in the last decade. In early March, co-founder David Rubenstein re-iterated his view that the risk-reward balance in the country was unsuited to private equity investment.

The new fund is said to be an initiative of Russian President Dmitry Medvedev, who will also establish a committee of senior global investment executives to advise on Moscow’s transformation into an international financial centre, the Financial Times reports.

BC’s Promising Start to Discount Era

In Europe’s first heavyweight fundraising of the year, London-based BC Partners has smashed the target for its latest private equity fund, thanks in part to a revised fee structure.

The first close was held at a reported €4 billion ($5.6 billion), well in excess of the €2.5 billion to €3 billion that had been forecast. The fund is targeted at €6 billion ($9.6 billion), with a final close is set for June 2011.

Early investors in the fund were reportedly tempted by 5% and 20% discounts on management and performance fees, respectively.

BC Partners will also only grant staff performance bonuses once cash has been returned to investors and specific benchmarks hit.

Although the first close means BC can start investing its ninth fund, the firm still retains uncommitted capital in its last, €5.9 billion fund, which was raised in 2005.

Investors Snap up NVT

Newcastle-based NVM Private Equity has seen shares in its Northern Venture Trust (NVT) sell out more than two months ahead of schedule.

Subscriptions for the £15 million ($24.3 million) venture capital trust (VCT) were meant to stay open until 28 April, but NVM Chairman Tim Levett said his firm’s strong track record had stirred investor enthusiasm.

He also pointed to external factors.

“People paying 50% income tax are looking for tax-efficient investment and VCTs are the most attractive,” he told VCJ.

“They are also looking for VCTs that can do larger deals and NVT and the two funds we’re doing the top-up offers on are both pre-2006 funds so they can do bigger deals,” Levett said.

NVM has also announced a linked £3.15 million top-up offer for Northern 2 and Northern 3 VCT, to close on April 5 at the latest.

Although the NVT funds are generalist in nature, their focus is on the service and IT sectors.

Levett said he anticipates that other generalist funds will have similar fundraising success this year.

Longbow Offers Boots Leverage

Longbow Capital has launched its latest Enterprise Investment Schemes (EIS) fund, which offers income and capital gains tax relief on investments in the health care and life sciences sector.

The planned £10 million ($16 million) fund will close on April 1 and will invest primarily in companies emerging from the Boots Sector for Innovation, a joint venture between Longbow and Boots, the U.K.’s dominant high-street pharmacy.

“The relationship with Boots ensures that products have access to a distribution network, meaning that investors will see the products rolled out across the U.K. and through international networks,” said Longbow Partner Julian Hickman.

A notable success to emerge from Boots has been Smooth Skin hair reduction product, developed by Cyden, a company in which Longbow has invested roughly £5 million ($8 million).

The EIS fund will invest in up to eight companies over 12 months, of which at least five will be linked to BSI.

Sun sets on Ingenious VCTs after Government U-turn

Less than a month after injecting £1 million ($1.6 million) into two solar venture capital trusts (VCTs), Ingenious Ventures has suspended its share offer due to regulatory uncertainty.

“The announcement by the Department of Energy and Climate Change of a proposed early review into Feed in Tariffs has caused a period of uncertainty and therefore [we] regret to announce that the offer of shares launched on 9 November 2010 has been suspended pending further clarification of the Government’s position,” Ingenious told investors in a prepared release.

After raising £4 million ($6.4 million) by February 2011, Ingenious was confident enough to pump £1 million from its corporate balance sheet into Solar UK VCT 1 & 2, and was preparing for its first acquisition in Cornwall, England’s most southerly county.

Ingenious said at the time that it was investing solely in the United Kingdom so as not to expose its VCT shareholders to overseas policy risk.

The British government has brought forward a review of feed-in tariffs by a year due to concerns that the regime, intended to boost household solar take-up, was being exploited by large-scale commercial operations.

Separately, Ingenious has launched a £10 million EIS fund called Vindemia that will target annual returns of 10.8% on investment in fine wines.

The Matrix Group, another London-based firm, has withdrawn a linked offer for two of its Clean Energy VCTs due to uncertainty over feed-in tariffs.