Blue Chip Fund-of-Favours European Buyouts

Unicapital Investments, a new fund-of-funds created by independent Swiss asset management group Unigestion Holding and the bank Pictet & Cie, was established in November last year and closed at the end of March with subscriptions of CHFr 200 million (ecu 122 million).

Bernard Sabrier and David Chamberlain of Unigestion said the vehicle would be strongly biased towards European and buyout funds. “We are not looking for new stars or niche players but blue chip’ private equity groups. Unicapital Investments’ portfolio will be designed to offer a good risk/return profile for European institutions entering the private equity market”.

The Luxembourg-registered fund has already taken positions in European funds managed by Doughty Hanson, Cinven, Schroder Ventures, Industri Kapital, BC Partners, Qualis and CVC European Equity Partners, while in the US, it has invested with The Carlyle Group and MD Sass. These existing commitments total around CHFr 130 million. Unigestion itself acquired some of these holdings prior to the formation of Unicapital Investments and later transferred them to the fund.

Unigestion and Pictet expect to commit to two or three additional funds in the coming months. Unicapital Investments should effectively reach full investment by this summer.

The completed Unicapital Investments portfolio is expected to comprise 78% in buyout funds, 12% in venture and development capital vehicles, 6% in emerging markets funds and 4% in special situations vehicles. Geographically, 57% of the fund will be invested in Europe, 37% in the US and 6% in emerging markets.

Pension funds and insurance companies dominate Unicapital Investments’ participants. Some 40% of the total was raised in Germany, 35% in Switzerland and 5% in France, with the balance coming from institutional and private investors elsewhere in Europe. As sponsor, Unigestion invested CHFr 30 million of its own capital in the fund-of-funds on parallel terms and conditions with the other investors.

The fund-of-funds is listed on the Luxembourg Stock Exchange. Its management fee is 1.5% per annum; realised proceeds from the portfolio are not subject to Luxembourg withholding tax. Short-term liquidity within the fund will be placed either in bonds and currency markets or in hedge funds, according to individual investor preference.

Unicapital Investments will immediately distribute proceeds from the sale of underlying investments, and investors will receive a first repayment in June, resulting from The Carlyle Group’s realisations of Howmet Corporation and Elgar Electronics and Cinven’s sale of Newsquest. Further distributions from the more mature funds are expected in the near future.

Unigestion acts as the fund manager and Pictet as custodian and administrative bank for Unicapital Investments. Daniel Pineau and Pierre Grandjean of Pictet will work closely with Bernard Sabrier and David Chamberlain in the fund’s management team.

The fund-of-funds represents Unigestion’s first private equity product for third parties, although the group has previous exposure to direct LBO investments in the financial sector, most notably the 1988 acquisition of Banca della Svizzera Italiana, together with a number of deals in France. This latest move, a response to the rapid growth of the European private equity markets, completes the range of bond and equity management products offered by Unigestion. In the future, Unigestion plans to work with Pictet to develop other advisory services and private equity products specifically designed for European investors.