• 20 investment staff to get avg 3 mln pounds
• Move comes after year of gains
• First time Electra has set aside carried interest provision
After years of tough market conditions private equity firms have enjoyed a better 2013, helped by a rally in equity valuations, strong demand for the debt they use to finance their deals and a recovery in the market for public listings.
This is the first time Britain’s Electra has set aside carried interest provision – the share of a fund’s profits entitled to be paid to staff – since it started investing its current pool of capital in 2006.
It set aside 63 million pounds in total for staff after a 26 percent rise – 222 million pounds in gains – in the value of its investments in the 12 months to the end of September.
That rise took Electra’s cumulative gains over the threshold that triggered the incentive scheme provision, although Electra did not specify the level of the threshold.
The firm said 22 million pounds of the provision related to gains made in previous financial years.
Private equity managers raise money to buy companies, try to improve their performance and then hope to sell them at a profit. Partners in the funds are typically entitled to a share of those profits.
Under Electra’s incentive scheme, the 63 million pounds will only be paid out once it has exited its investments, meaning payouts are likely to be stretched out over a number of years.
Electra spent a record amount of money on deals during the year and also realised a record amount from its investments. It invested 337 million pounds in the 12 months to end-September, up from 150 million pounds in the previous year, and realised 459 million pounds.
The firm said its diluted net asset value per share – the value of its total investments divided by the number of shares – was up 12 percent during the year to 2,764 pence. That was 5 percent above an estimate by J.P. Morgan Cazenove but below a 19 percent rise in the FTSE All-Share Index.
Tommy Wilkes is a reporter for Reuters News in London