Advent recruits more European investors

Participation from European institutional investors increased substantially in Advent International’s new €2.5bn (US$3.3bn) global buyout fund.

European institutions accounted for 38% of the 86 investors in GPE V, which closed earlier this week. This compares with participation of around a quarter in GPE IV, the preceding US$1.9bn global fund that closed in 2001.

Will Schmidt, a London-based managing director at Advent, recognised that private equity allocations to European institutional investors had been growing over the last few years due to low equity markets and new entrants into the asset class.

“It is a benefit to have more European investors in our fund,” Schmidt said. “We run a global franchise, but we will be targeting around two-thirds of our new investment towards Europe, where restructuring opportunities make for natural deal flow. There is also less competition for investment in growth companies in Europe than in the US.”

North American investors make up 46% of the new fund, with Asian and Middle Eastern investors accounting for 16%. The fund was launched last October with a €1.75bn target and was allocated at the end of January. The fund was oversubscribed to the tune of €4bn, but was capped at €2.5bn to avoid strategy drift.

“It became clear in the course of our conversations that investors had a clear view on the appropriate size of the fund. They want us to maintain our clear focus on the middle market,” Schmidt said.

The fund has the flexibility to solely underwrite deals of up to €1bn enterprise value, however.

Eight of the largest investors in the fund are GIC Special Investments, Canada Pension Plan Investment Board, AlpInvest Partners, State of Michigan Retirement Systems, funds managed by Standard Life, Pantheon clients, Partners Group-advised clients and California Public Employees’ Retirement Group.

Market sources said that Advent had achieved a good result. Advent has benefited as historical pan-European competitors BC Partners and Permira have moved upmarket, reducing its major rivals in the middle market to firms including Bridgepoint and Barclays Private Equity.

Barclays and Bridgepoint have recently closed respective €1.65bn and €2.5bn funds. Both of these also attracted strong support. Investors are concerned about being locked out of the current middle-market fund cycle.

Investors also recognised that Advent had solidified its European identity since its last fundraising and maintained a stable level of returns.