Greenoak Capital Management is now in the market with a European fund-of-funds.
The group launched its fund-raising effort in September and has set a $200 million (ecu 167 million) target for the vehicle. The Greenoak European Private Equity Fund is the group’s first formal partnership, although Greenoak – which changed its name from Granville Private Equity Funds this summer to differentiate between Granville’s advisory and direct private equity operations – currently advises around $500 million invested in more than 200 private equity funds worldwide.
Greenoak European Private Equity Fund will invest in around 15 European venture and private equity funds to build a diversified portfolio across the whole unquoted investment spectrum and will deploy at least 80% of its capital in the developed Western European private equity markets. Chief executive Gary Solomon said the balance could potentially be deployed in Central European funds “if we find the right groups”.
The fund-of-funds will be confined exclusively to fund positions, precluding direct investments, which Gary Solomon described as “a potential formula for unhappiness”. He explained that to pursue an active direct co-investment programme requires different skills and resources from fund investments, while passive co-investment can be justified only by the fanciful supposition that all an underlying fund’s investments will be successful.
Although the European fund-raising frenzy of the past couple of years now appears to be slackening off, Greenoak is confident that it will identify sufficient quality opportunities to deploy the fund-of-funds successfully throughout its four-year investment period; Gary Solomon added that staggering investments throughout the next four years would enable Greenoak European Private Equity Fund to benefit from dollar-cost averaging, an effect that is enhanced for funds-of-funds by the spread of investment lives in their portfolio funds.
At present, Greenoak is actively marketing the fund-of-funds to European and US institutions, but the group has also encountered interest from potential investors in Australia and the Middle East. Gary Solomon is spearheading the US fund-raising programme from Greenoak’s New York office, while London-based managing director Guy Eastman heads up the European effort.
Greenoak has already lined up two cornerstone investors, each of whom will commit GBP10 million to the fund-of-funds. One, Hermes, is a long-standing Granville client. Gary Solomon declined to name the other institution, because the commitment has not yet been formally approved by its investment committee, but confirmed that it was a UK-based institution. Granville itself will invest GBP1 million in Greenoak European Private Equity Fund.
Greenoak has scheduled a first close for the fund-of-funds for the first quarter of next year and will hold final closing by the autumn of 1999.