INVESCO finds FoFs market challenging

INVESCO Private Capital has closed its third fund-of-funds vehicle, INVESCO Partnership Fund III, at $300 million. This brings the total raised by INVESCO since 1997 for its three fund-of-funds to $1.2 billion.

INVESCO Partnership Fund II, the first fund-of-funds launched by the group following its acquisition of Chancellor LGT, raised $500 million in 1999. INVESCO had initially hoped the current fund would raise a similar amount and in a statement described the current environment as a challenging marketplace. Parag Saxena, managing partner and president of INVESCO Private Capital, said: “We are extremely pleased at how well this product has been received by the investment community given the current climate.”

INVESCO will invest the fund in three tranches: $148 million has been allocated to venture capital, 20 per cent of which is destined for Europe and Israel, $90 million will be invested in US expansion to buyout stage funds and the remainder will be dedicated to non-US buyout funds. The fund will invest in 30 to 40 funds overall. Between 50 per cent and 60 per cent of the fund’s capital has already been committed and investors can expect the next generation fund before too long, with INVESCO moving towards a annual fund raising cycle.

Ray Maxwell, London-based managing director of INVESCO, said the firm found it difficult to break into the European market with this fund, which was raised from investors based in the US and Japan. The fund has 30 limited partners including public funds, endowments and foundations, corporate pension plans and high net worth individuals. INVESCO investors can choose to invest in any of the three tranches, a mixture of all three or an allocation personalised to suit their needs. Phil Shaw, managing director of INVESCO Private Capital, said: “For many of the fund’s limited partners this is their first experience with venture capital and private equity. Most have selected the diversified portfolio as their investment vehicle.”

INVESCO Private Capital is based in the US, with offices in New York, Palo Alto and London. In addition to its fund-of-funds business it also makes early and expansion stage investments in communications, IT, global commerce and life science.