European LP News, February 2011

Secondaries Trading Site Approved

A new trading platform for private equity secondaries was set for launch last month after receiving authorization from the United Kingdom Financial Services Authority.

SecondaryNet, the brainchild of Secondcap, allows limited partners to buy and sell stakes in private equity funds via an online platform.

Pension funds, life insurance companies, endowments and other qualified LPs can register interest for a particular asset on the platform, following which advisors or sellers can post an interest to sell.

After due diligence and general partner approval, sales can be closed following an automated process that should streamline transactions and reduce costs.

It is hoped that the platform will open secondaries trading to non-specialists, pushing deal flow and growth in the market.

The platform aims to process one-fifth of all secondaries’ deals within four years.

Secondcap, which plans to address the real estate and infrastructure fund markets, plans to open a New York-based office in addition to its London locale.

Investors Warm to PE in 2011

A survey by London-based researcher Preqin of 100 institutional investors worldwide has found that two-thirds intend to invest in new funds in 2011, and more than half predict that they would commit more capital to private equity than in 2010.

Preqin forecasts that funds will raise $300 billion in 2011, compared with $225 billion in 2010, a year in which almost half the respondents revealed they had made no private equity allocation.

Most LPs said they were at or above their target allocations for the year, while 40% of European respondents said they were under target.

For 2011, the majority of investors viewed small to mid-market buyout funds as presenting the best opportunities.

However, concerns about debt and transparency were also highlighted.

“Funding private equity investments with high levels of debt is no longer a viable option. Private equity firms need to roll up their sleeves and get stuck in, making improvements and adding value to companies,” according to one respondent from a British pension fund.

Meanwhile, a Danish public pension fund complained: “Reports from GPs are quarterly so there are lags from fund events … GPs are not very forthcoming with additional information requests.”

CDC Makes First PE Commitment in Bangladesh

British development finance body CDC Group plc has committed $10 million to Bangladesh’s first dedicated private equity fund.

Frontier PE is the first fund to be managed by Brummer & Partners Asset Management (Bangladesh) and will provide growth capital to family businesses in support of Bangladesh’s export, agriculture, health, education, IT and service sectors.

Investments have already been made in a battery manufacturing business and a supermarket chain.

All told, Frontier has raised $88 million from other development finance institutions, including Norfund and FMO, the Norwegian and Dutch development bodies, and the World Bank’s International Finance Corp.

CDC has assets of £2.5 billion ($4 billion) and primarily targets funds investing in South Asia and sub-Saharan Africa.

SVG Sells Funds, Repays Notes

Fund-of-funds manager SVG Capital has completed repayment of approximately £33 million ($52.4 million) of senior unsecured notes, leaving it with £196.6 million ($312 million) of senior unsecured notes outstanding.

In line with their June carry value, the firm will also sell six warehoused funds for £23.1 million ($36.6 million), freeing up £40 million ($63.4 million) of uncalled commitments.

The firm said the buy-back and fund sale would strengthen its balance sheet,

SVG shares hit a 2-year high in November on the back of big gains in the portfolios of Permira funds, in which SVG is the largest investor.

Access Granted Approval to Restructure

Finland’s Pohjola Bank has bought 30% of fund-of-funds manager Access Capital Partners from CapMan, which said the deal would add €23 million ($30.7 million) to its 2010 result.

Access has also transferred a 10% share to Pohjola, leaving the combined Access-Pohjola entity 55% owned by Access, 40% by Pohjola and 5% by CapMan.

As part of the deal, Access has acquired Pohjola’s private equity division, which controls €1.6 billion ($2.4 billion) of funds, meaning Access now has roughly €4.5 billion ($6 billion) of funds under management.

Access’ European locations include offices in Guernsey and France, and authorities in both regions have now given the necessary regulatory approval for the deal to go ahead.