Alpha Associates, a Swiss private equity fund-of-funds manager, has reached a first closing on Alpha CEE II, its second vehicle aimed at Central and Eastern Europe.
The fund raised €109m, and is in course to meet its target of €300m by the end of the year. It has received commitments from the European Bank for Reconstruction and Development (EBRD, a special purpose vehicle arranged by Merrill Lynch, as well as a range of insurance companies, banks and family offices.
Like its predecessor fund 5E Holding – which has been investing since 1998 and is the only fund-of-funds dedicated to the region – Alpha CEE II will invest in private equity funds located in the new EU member states of Central and Eastern Europe as well as the second round accession countries of Romania and Bulgaria (due to be admitted in January 2007). Alpha will make both secondary and direct co-investments.
The typical commitment size for a primary fund investment will be between €10m and €20m, and for secondary fund purchases the firm expects to invest no more than €20m.
A typical transaction size for a direct investment will be between €3m and €10m.
Alpha believes that the addition on 10 new members to the EU in 2004 has opened up a window of opportunity for private equity as the economies of this country change with the advent of accession.
It believes the risk/reward profile for private equity investment in the region is currently unique as GDP growth continues to outstrip the average of the EU-15, yet the economies are stable following EU accession and entry valuations remain attractive.