Alpha Associates plans second CEE fund of funds

Swiss-based private equity firm Alpha Associates is pre-marketing its second fund of funds for investment in Central and Eastern Europe. The new vehicle will launch officially next year and is aiming to raise €300m for investment in transformation economies that have been impacted by EU enlargement. The investment strategy continues the theme deployed by 5E Holding, the firm’s first Central and Eastern European private equity fund of funds, which was launched in 1998.

Alpha Associates was spun out from Swiss Life Private Equity Partners on April 1 through a management buyout. It is led by CEO Peter Derendinger, previously a member and delegate of Swiss Life Private Equity Partners’ board and responsible for the operations of the company from May 2003.

A spokeswoman for the firm said that the typical size of investments would reflect investments made by the previous fund of funds. That fund typically invested in mature funds for between €2m and €25m. 5E Holding closed at SFr148m, of which SFr23m is outstanding. The new fund of funds, ALPHA CEE 2005, will make primary fund commitments in the new EU member states, second-round accession states and selective investments in Russia.

GDP growth in Central and Eastern Europe is outstripping that achieved in the first 15 EU member states, the firm said. At the same time, macroeconomic and transaction risk is decreasing as the countries adapt their legal and regulatory frameworks to EU standards and as the local currencies are expected to converge towards the euro.

The Central and Eastern European private equity industry, which started in the early 1990s, has developed substantially over the last year and there is a growing base of experienced fund managers with demonstrable track records operating in the region.

As the region continues to be under-served with equity capital, and competition among private equity players is limited, entry valuations remain attractive. This creates a unique risk/reward environment for private equity investment, Alpha said.

Alpha is staffed by 12 investment professionals, some 10 of whom came over with Derendinger from Swiss Life.

Copernicus Capital is also planning to raise a fund of funds focused on Poland. That vehicle is aiming to raise up to US$150m from private equity fund managers positioned to take advantages from the opportunities arising from EU enlargement.

That fund of funds will target medium-sized buyout funds with assets under management between €30m and €100m. Copernicus manages approximately US$35m in the Poland Investment Fund and the Central Poland Fund, both of which are due to mature in the next few years