Aviva Launches Perpetual PE Fund of Funds

The asset management arm of insurance giant Aviva Plc recently began marketing its first European private equity fund of funds.

Called the Aviva Investors Private Equity Program, the product differs from a conventional fund of funds in that each year a new sub-fund, or tranche, will be open to backers, with the goal of creating a perpetually replenished fund.

The vehicle launched last year with seed capital from the parent company and a few other backers. The new tranche, which the firm began marketing a few weeks ago, is expected to close in the first quarter of 2009 and is open to U.S. backers, said Philip Pearson, head of alternative investments business development for UK-based Aviva Investors, which manages the program. “We haven’t published any firm target,” said Pearson. “It’s a moving target, but the fund now has in the ballpark of €30 million of assets under management.”

“We’ve had good but soft interest” in the product so far, Pearson told Buyouts. The program is being marketed to pension funds and a range of other institutions.

The firm intends to make commitments of €10 million ($12.8 million) to €70 million each, spread between 10 to 50 European middle-market private equity funds every year, 60 percent to 70 percent of which will be buyout funds. Eventually, the firm plans to make co-investments as well. Aviva Investors intends to avoid commitments to mega-funds because it believes they have been using too much leverage in their deals and have not been “ruthless and disciplined” enough on the prices they’ve paid for investments, said Pearson.

Aviva plc announced plans to create Aviva Investors in February, moving to combine the resources of several asset management businesses. Separately, the unit launched Aviva Investors Global High Yield Bond Fund on Nov. 4, saying the vehicle would invest in below investment grade debt securities.