European LP News, May 2012

Index Books Big Pharma Funding

Pharmaceutical giants GlaxoSmithKline and Janssen, part of Johnson & Johnson, have injected capital into Geneva-based Index Ventures’ first dedicated life sciences fund.

GSK and Janssen have committed an unspecified amount to the €150 million ($195 million) venture fund, which focus on deals in Europe, but also invest in the United States.

The fund, called Index Life VI, joins four other active Index funds that also invest in life sciences, though this is the first Index vehicle separated from making technology investments.

Index Life VI will target early stage biotech companies that concentrate on one or two products, rather than multiple programs.

Index’s current life science portfolio comprises 20 companies, 11 of which are based in the United States.

The fund follows the November 2011 close of Index’s Growth Fund II, which at €500 million ($650 million) is one of Europe’s largest venture capital funds.

LPs Target Direct Investments

Limited partners are seeking more co-investments with their private equity managers as they try to improve returns.

Two-thirds of investors interviewed by data group Preqin said that they wanted to increase their co-investment allocations, often at the expense of fund commitments, with better returns, lower fees and more control over investments cited as the most popular reasons.

“People have become disillusioned about fund investments as fund sizes are getting smaller. We want to make as many co-investments as we can with existing managers,” a Swiss LP told Preqin.

Among institutional investors, fund-of-funds and public pension funds had the biggest appetite for co-investment, while those allocating between $250 million and $1 billion to private equity were most likely to co-invest.

A majority of the surveyed LPs requested co-investment rights before committing to private equity funds, while anecdotal evidence suggested that those participating early in fundraisings received the best terms.

Pension Fund Signals Private Equity Focus

Danish pension fund PKA Alternative Investment Partners has capitalized on a strong year for its private equity and infrastructure holdings and set up a dedicated alternatives firm.

Over the next three years PKA will invest about $1.6 billion in private equity, woodland, agriculture, infrastructure and clean energy, according to website IPE.com.

PKA’s managing director said in February that alternatives were needed to balance risk during turbulence in other financial markets.

Employing six people by the end of 2012, PKA should also internalize several functions that had been outsourced up until now.

The new subsidiary caps several years of mounting private equity investment by PKA, which committed $48 million to Silverstreet Capital’s Africa-focused Silverland fund last year.

Sofinnova Attracts Irish State Money

Silicon Valley firm Sofinnova Ventures has agreed to set up an office in Dublin in exchange for a $12.5 million investment from Ireland’s National Pension Reserve Fund (NPRF) and $25 million from Enterprise Ireland (EI).

The Irish state entities thus become limited partners in Sofinnova Ventures Fund VIII, a $440 million life sciences fund, which will invest in the United States and Europe.

Other investors in the fund include California State Teachers’ Retirement System, Oregon State Treasury and San Francisco Employees’ Retirement System.

As a condition of EI’s commitment, at least $25 million from the fund will have to be invested in Ireland, though the NPRF money can be spent freely.

The NRPF and EI invested as part of Innovation Fund Ireland, an Irish government initiative to attract venture capital to the country.

The Innovation Fund has up to €250 million ($325 million) to spend and has already backed venture funds from DFJ Esprit and Polaris Capital.

Geldof, Annan Fund Attracts Development Finance

Rock star appeal obviously extends from bandstand to boardroom as Bob Geldof’s new private equity fund has just wrapped up cornerstone investment to hit first close at $200 million.

Promoted by both Geldof and Kofi Annan, the Africa-focused fund garnered support from the World Bank’s IFC, British development finance body CDC, the African Development Bank and Geneva-based Vital Capital.

Named 8 Miles to reflect Africa’s proximity to Europe, the fund will span a range of sectors, including agriculture, telecoms, health care, retail and business services, across the continent.

CDC invested $50 million and drafted environmental, social and governance criteria for the fund’s investments.

An all-African private equity team will manage 8 Miles, pursuing a remit to support sustainable business and improve corporate governance.

Compiled by Alex Derber