European LP News, June 2011

CDC Posts Earnings Rise Ahead of Possible Restructure

Mired in controversy it may be, but CDC Group, the United Kingdom’s development finance body, has seen its private equity returns rise 30% in 2010, up to £269 million ($439 million).

The fund-of-funds, which targets developing economies, secured an 18% return on its portfolio, which is split between £877 million ($1.43 million) in Africa and £971 million ($1.58 million) in Asia.

Often criticized for putting profit before poverty reduction, outgoing CEO Richard Laing has been keen to defend the group’s record.

“CDC’s performance in 2010 is something the U.K. can be proud of,” he said in a statement.

“In the last three years alone we have made a real difference, putting over £1.2 billion ($2 billion) into the types of businesses that are the lifeblood of economic development in poor countries. All of this has been done without costing the U.K. taxpayer a penny,” he added.

CDC reported that year over year, its total annual investment increased 17% to £420 million ($685 million).

Results of a government investigation into CDC’s business model were due in May, after VCJ’s deadline.

Montana Targets Early Liquidity

Private equity investors are being offered a range of liquidity and asset management services by new Swiss firm Montana Capital Partners.

Focusing on private equity secondaries sold outside of auction, Montana aims to provide tailored investments based on risk appetite and liquidity requirements.

In addition, the firm offers securitizations of private equity portfolios encompassing equity tranches and debt tranches with running yield, and different cash-flow and risk profiles.

“Many investors have an increasing need for liquidity and hence do not want to commit to a 12- to 15-year fund life,” said Marco Wulff, co-founder of Montana, in a statement.

Montana will also provide asset management to those shifting from fund-of-funds to direct investment, and risk management for banks and insurance companies.

“A sound risk management process will be required with ongoing regulation such as Solvency II and Basel III,” said Christian Diller, co-founder of Montana, in a statement.

Both Diller and Wulff previously worked at asset management firm Capital Dynamics, the former as head of solutions, the latter as co-head of private equity secondary activities.

HVPE Bids for Absolute Control

London and Amsterdam-listed HarbourVest Global Private Equity (HVPE) has, together with HarbourVest’s $2.9 billion Dover Street secondaries fund, made an offer for public Swiss firm Absolute Private Equity.

The offer, which Absolute’s board has approved, is worth up to $752 million and is expected to close in the third quarter. HVPE’s direct contribution will be at least $38 million, funded by its $500 million credit facility.

“Given the maturity of the portfolio, the [HVPE] Board believes this is a positive and appropriate use of the company’s credit facility,” said Sir Michael Bunbury, chairman of HVPE, in a statement.

Absolute’s portfolio covers about 1,000 investments through underlying funds. By investment cost, 14% of the portfolio is in the diversified financials sector and 8% is in software and services.

Absolute invests in private equity and venture capital funds and by December 2010 had roughly $1 billion under management, almost 40% of which was with Warburg Pincus funds.