European LP Briefs, November

Advantage Capital Faces Closure Following LP Dispute

Under-funded Advantage Capital faces closure unless it can secure new capital by Christmas, Martin Bodenham, the firm’s co-founder, recently told the Daily Telegraph.

In the first action of its kind in Europe, the Financial Services Authority will close Advantage unless it reaches certain minimum capital requirements.

This would mark the second landmark ruling concerning Advantage this year, following its win this summer of a test case for breach of contract against one of its limited partners. The court ruled against millionaire Robert Adair, who had cut off investment into Advantage’s second, £40 million ($63.3 million) fund in 2009, despite agreeing to contribute a further £20 million ($31.6 million).

“We won the case so he is liable to us, but the hearing to decide what damages he owes us will not be until next autumn. That is too long for us to survive,” Bodenham told the Telegraph.

Advantage has tried to recapitalize through a portfolio sell-off, but efforts have been stymied by the need for Adair’s approval when divesting assets. —Alex Derber

LPs Reportedly ‘Livid’ Over 3i Restructuring

3i faces a backlash from limited partners after reorganizing its private equity business.

The firm is merging its buyout and growth finance arms to form an integrated private equity division, leaving it with two main lines: infrastructure and private equity.

However, the shake-up, which includes running private equity along geographical rather than product lines, reportedly caused the departure of Jonathan Russell, managing partner, and one of 3i’s most well-known dealmakers, having been with the firm for 24 years.

“Investors are livid. There will be big challenges for them to raise another fund, as they have changed the team and knifed their head of buyouts in the middle of the latest fund,” one limited partner told the Financial Times.

Fund-raising for 3i’s latest vehicle, which is reportedly capped at €5 billion ($7 billion), could stall because of Russell’s exit, whose seniority forces the group to hold a six-month consultation with investors.

Other executives who have followed Russell out the door include Gustav Bard, Nordic managing director; Mike Robins, head of U.K. buyouts; and Keven Parker from 3i’s Manchester office. —Alex Derber

Pantheon Falls Short after Turning Away CIC

The decision of U.K.-based private equity firm Pantheon to reject investment from China’s sovereign wealth fund could have cost it a successful fourth fund-raising.

Pantheon recently spurned a $500 million mandate from trophy client China Investment Corp. (CIC) in July. Although the reasons remain unclear, it is thought that Pantheon balked at CIC’s investment conditions. Another possible reason was that CIC’s investment would have created transfer pricing issues, or a conflict of interest with other investors.

Whatever the cause, Pantheon’s latest secondaries fund closed in October with $3 billion in commitments, about $750 million short of target.

Pantheon launched the fund in late 2008, but struggled in a tough fund-raising climate, which makes its rejection of CIC’s commitment all the more unusual to industry watchers.

After CIC was spurned, it is believed that CIC split its intended Pantheon investment between Lexington Partners and Goldman Sachs. —Alex Derber

Ireland Injects €30M into 2 DFJ Esprit Funds

Ireland’s National Pensions Reserve Fund (NPRF) has followed through on a promise to increase its private equity commitments, putting €30 million ($41.8 million) to work in two venture capital funds managed by DFJ Esprit.

NPRF agreed to invest €20 million ($28.9 million) in DFJ Esprit Fund III and €10 million ($14 million) in Fund X. The commitments are part of Innovation Fund Ireland, a €500 million ($698 million) initiative to bolster Ireland’s tremulous economy by attracting offshore venture capital.

As a result of the investments, London-based DFJ Esprit has opened a Dublin-based office to support deal activity in Ireland.

DFJ Esprit focuses on technology, media, telecom, med tech and cleantech investments and has €600 million ($837 million) under management.

Other investors in DFJ Esprit Fund III include the European Investment Fund, Finnish Industry Investment, HarbourVest, LGT, Partners Group and the UK Future Technologies Fund. —Alex Derber