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European LP briefs for September 2014

Nordea scoops top fund-of-funds spot

Copenhagen-based Nordea Private Equity has been judged the world’s most consistently high-performing fund-of-funds manager, according to private equity researcher Preqin.

Nordea’s top ranking was down to top-quartile results by all three of its funds of funds, the last of which was raised in 2009. The firm typically commits about 10 million euros ($13 million) at a time to European mid-market buyout vehicles.

Meanwhile, fellow Danish manager ATP Private Equity Partners—an arm of Denmark’s largest pension fund—took second spot on the list, thanks to top-quartile performance from three of its previous four funds.

Preqin’s league table was composed only of firms that provided data for at least three previous funds, the newest of which had to have begun investing before 2012.

Volksbanken lightens the wagon

Troubled Austrian bank Volksbanken has ditched its private equity portfolio as part of a European Union-mandated restructuring program.

Selling in tranches since late 2013, the bank has now finished offloading 110 billion euros ($147 billion) of direct investments and LP positions in private equity funds focused on German-speaking countries and Eastern Europe.

The purchasers were not disclosed, unlike in July when London-based private equity house Anacap, U.S. buyout shop H.I.G. Capital and Deutsche Bank bought 495 million euros of property loans from Volksbanken’s Romanian arm.

Stephan Koren, Volksbanken’s CEO, said that the recent divestments had put the bank’s restructuring ahead of schedule. However, Austria’s Der Standard newspaper has reported that the bank—which is now 43 percent owned by the taxpayer after 1.4 billion euros of state aid—may need as much as 1 billion euros more to pass stress tests.

Private equity becomes leading alternative

Private equity has replaced infrastructure as the main alternative investment among the world’s top 100 asset managers, according to a Towers Watson survey.

Of more than $3.2 trillion of alternatives under management globally in 2013, 34 percent was in private equity funds and funds of funds, compared with 32 percent in infrastructure and 28 percent in hedge funds. Assessing private equity’s growing popularity, the report’s authors concluded that buoyant markets had allowed successful managers to return cash to investors, which had in turn helped their own fundraising.

North America remains well ahead of Europe for institutional investors’ private equity allocations, although the opposite is true for infrastructure investment. Pension funds remain private equity’s most important investors, although sovereign wealth funds are competing for GPs’ affections, with a third of their alternative portfolios now in private equity.

Small change from charities

European charities and foundations retain notably more conservative investment strategies than their North American counterparts, a survey by Cerulli Associates has shown.

Only a small fraction of European charities have opted to devote more investment to private equity in recent years, whereas a third of endowments and foundations polled in the United States promised to raise their private equity allocations during 2014.

Interestingly, though, any aversion to private equity is not down to conflicts of interest, such as the Church of England’s discovery that it was invested through an Accel Partners fund in Wonga—a payday lender it had described as immoral. In fact, most European charities hold less than 10 percent of their portfolios in ethical funds or investments.

Cerulli’s survey covered European charities with $110 billion under management, of which almost half was invested in public equities and roughly 5 percent in private equity.