Legal & General Closes GBP190 Million Annual Fund

Legal & General Ventures (LGV) has closed GBP90.5 million of external commitments for its fifth annual partnership fund, the latest in a series of UK and Continantal European buyout vehicles for individual calendar years.

With Legal & General’s customary annual commitment of GBP100 million, the LGV 1998 Private Equity Fund LP weighs in at GBP190.5 million (ecu 287 million). The 1998 vehicle is comfortably the largest raised to date by LGV. In 1994, the group brought in some GBP20 million of third-party capital for the inaugural 12-month structure, increasing the total to GBP30 million in 1995, GBP55 million in 1996 and GBP76.5 million last year.

The appeal of a 12-month commitment period to institutional investors is underlined both by the high level of repeat custom the annual funds have enjoyed and by the rate at which the participant line-up is growing. Only two of the participants in the 1997 fund have not committed to this year’s vehicle, while six first-time investors have swelled the ranks of external investors in this year’s LP to 22. European investors account for one third of the external capital, while international, principally US, groups provided the balance.

The steady increase in fund size has been justified by LGV’s increasing spend rate. The 1997 partnership came close to full investment, disbursing approximately GBP120 million in seven deals, including the GBP620 million Unipoly buyout, with a further 25% earmarked for follow-on investments.

The closing of its largest fund so far therefore rounded off what had already been a record year for LGV, which arranged nine equity and mezzanine leads during 1997 with a total transaction value of over GBP1.2 billion; mezzanine investments are made through the LGV-managed quoted Mithras Investment Trust.

Last year, LGV led two non-UK transactions- one, Sante Finance, in France and one, Burkhalter, in Germany. Marketing director Roger Charlesworth said the 1998 fund may well make a greater number of non-UK investments than its predecessor, although the proportions of capital spent in the UK and Continental Europe respectively would depend on “whether we do another Unipoly and if so, where”.

As 12-month LP structures, the LGV annual funds are still unique: though Alchemy’s Investment Plan enables investors to commit for a minimum 12-month period, it is an open-ended rolling structure. The LGV fund fee structure is unchanged: investors pay 0.5% up front on commitments and 1% on drawn-down capital.

Roger Charlesworth, who has spearheaded fund-raising for the annual LP’s since their inception, described the record level of commitments to the 1998 vehicle as “a major endorsement of LGV’s annual structure and track record” and said that the group would be targeting GBP250 million for its next annual fund.