Hamburg, Germany-based Blue Capital launched its first fund dedicated to secondaries. Additionally, it is the first of its kind in Germany to focus on individual investors as its LP base. The private equity firm began marketing the fund last month and hopes to have a maximum of $58 million by the end of the Q2, 2004.
“We will be happy if we raise between E20 million and R30 million ($23 million to $35 million) but we cannot do more than R50 million ($58 million),” says Rickmer Khn, a product manager with Blue Capital. “The market is extremely down and we would be happy if we made between R20 million and R30 million, but you never know.”
The fund, Blue Capital Equity II – Secondaries, will seek to invest in European and U.S. buyout funds that are between three and five years of age and already 50% or more invested. The fund will have an investment life of six or seven years and will close by December 2010.
While Blue Capital has invested in venture capital in the past, the venture market has not shown good enough returns to justify another dedicated fund or attract limited partners, according to Khn. “On the venture side we have to wait until our funds show some returns or IRRs,” he said. “The volatility and the downturn has hit the customers already in their portfolio so they are not looking at venture, but buyouts.”
Blue Capital says that the fund will make a maximum of four large secondary purchases and is already eyeing two: BC partners European Capital VII and Carlyle Partners III. Both those buyout funds have a mixture of European and U.S. investments.
The fund, which is being advised by Munich firm Braun & Schreiber, is unique in that it is targeting individual investors as its primary LP base. Investors need to make a minimum investment of about $58,000 in the fund. Such a fund normally has a minimum investment of $6 million. “This is the first German secondaries fund for private clients,” said Khn. “That’s a new thing for the German fund-of-fund clients. If you are a private client in Germany you normally can’t invest in a fund like this.” Blue Capital welcomes institutional investors as well, but isn’t actively courting them. Khn said institutional investors don’t normally enter the picture until later in the fundraising cycle anyway.
Blue Capital will likely begin raising a primary investment buyout fund by the fourth quarter of 2004. Blue Capital, a subsidiary of German banking giant HVB Group, was founded in 1999.