Parallel Ventures Spins Out From Axa SLAM

Paul Whitney, chief executive of AXA Sun Life Asset Management (AXA SLAM) and a former head of Cinven, is returning to private equity. He will head Parallel Ventures, a private equity spun out from AXA SLAM with an initial GBP500 million (ecu 767 million) of group monies under management. Paul Whitney aims to match this sum with external commitments within five years.

As its name suggests, Parallel Ventures will seek co-investment rights. This focus was chosen when both the AXA Equity & Law and Sun Life retail investment funds decided to scale up their private equity activities via Parallel Ventures following their merger in 1997. Paul Whitney explained the thinking behind this decision: “We could have built a team to do direct investments, but considerable strength in depth would have been needed to compete with the entrenched first division players in current market conditions. Creating a fund-of-funds was another possible route. Since AXA SLAM was not keen on the larger buyouts sector and would also have required a good spread – perhaps 20 to 30 fund investments – it could have been difficult to build a diversified portfolio without including “second division” managers. We decided instead to seek parallel co-investment rights with a smaller number of quality players”.

AXA Sun Life Investment Management last year made a commitment of GBP250 million to 3i’s GBP1 billion UK mid-market buyouts programme. This February, it announced an allocation of GBP150 million to Barclays Private Equity (BPE), to be matched pound for pound by capital from within the Barclays Group.

BPE has managed private equity funds for Sun Life for three years. In 1995, as BZW Private Equity, it took over management of the insurer’s GBP40 million venture portfolio from Sun Life Investment Management, along with a new capital allocation of approximately GBP45 million. Under the three-year agreement, BPE matched the new capital allocation with its own funds and also reinvested realised proceeds from the Sun Life portfolio. In contrast, the new allocation is effectively structured as an LP, and proceeds will be distributed on realisation.

Parallel Ventures will manage both these allocations and has now taken over management of the pre-1994 Sun Life investments that were originally passed to Barclays, along with AXA Equity & Law’s existing private equity portfolio, which comprised around GBP40 million of fund positions together with some GBP10 million of direct co-investments.

The nature of Parallel Ventures’ ready-made portfolio could stand it in good stead as it seeks to increase funds under management, Paul Whitney believes. “One of our unique selling points is the ‘one-stop shop’ approach – a willingness to take over portfolios comprising both fund and direct investments could be very appealing to institutions, particularly certain UK groups,” he said. Parallel Ventures would both manage existing relationships and invest new allocations for such clients. The firm is also looking at bringing funds from other companies in the AXA group under management.

Going forward, Parallel Ventures will seek to expand its range of co-investment partners. Given 3i’s focus on medium-sized UK buyouts and BPE’s generalist approach within the UK market, Parallel Ventures is now looking “particularly, but not exclusively towards Continental Europe”, Paul Whitney said.

AXA SLAM has retained a 25% holding in Parallel Ventures and will split the carry 40:60 with Paul Whitney and his team.