LP corner, week of Nov. 16, 2009

BNY Mellon buys stake in Siguler Guff

BNY Mellon Asset Management is boosting its private equity exposure with the acquisition of a 20% minority interest in international private equity firm Siguler Guff & Co.

The deal builds on an alliance between the two firms in which BNY Mellon offers Siguler Guff products to its clients.

Siguler Guff has about $8 billion in assets under management, gleaned from about 400 institutional investors, including endowments, foundations, corporate pension funds and public pensions.

Its investment activity is focused across three categories: funds of funds, advisory work and direct investment funds. Its specialties include distressed security investing, small-cap buyout funds and emerging market investments in Brazil, Russia, India and China.

BNY Mellon Asset Management and Siguler Guff formed a strategic alliance in January 2009 when Siguler Guff engaged BNY Mellon to distribute its products and services worldwide.

In May 2009, the relationship grew closer when a subsidiary of Siguler Guff became the investment advisor of the private equity fund-of-funds previously advised by WestLB Mellon Asset Management, a company jointly and equally owned by WestLB AG and The Bank of New York Mellon Corp.

Founded in 1991 within brokerage and asset manager Paine Webber, Siguler Guff became an independent firm in 1995. —Angela Sormani

Deutsche Bank acquires FoF for $1.9B

Deutsche Bank AG
has agreed to acquire investment banking group Sal. Oppenheim for about $1.9 billion, a move that adds another funds-of-funds business to the German bank’s private equity portfolio.

As of June 30, Sal. Oppenheim Group had about $7.5 billion in assets under management in its funds-of-funds business. Also as of June 30, the private equity group in Deutsche Bank`s own Private Wealth Management division, with 20 professionals in New York, Singapore and Zurich, managed more than $3 billion.

The acquisition is expected to close in the first quarter 2010.

Stefan Krause, CFO of Deutsche Bank, said in a public analyst call following the announcement of the deal that he sees a very good fit between the two private equity businesses, as well as potential for further development of Deutsche Bank’s private equity platform.

The transaction marks a significant boost to Deutsche Bank’s private equity business following a four-year pull-back. From 2002 to 2006, the bank reduced its private equity exposure significantly as part of a restructuring to focus on its core businesses. Private equity assets under management fell in 2002 from $7,3 billion in direct investments and $2.6 billion in fund investments to $445 million in direct investments and nearly $300 million in fund investments in 2006, according to the bank’s 2006 annual report.

An attempt by Deutsche Bank to boost its efforts in advisory work by taking a minority stake in Aldus Equity in early 2007 ended badly this year when the founder of the firm pleaded guilty to participating in a kickback scheme involving the New York State Common Retirement Fund. Deutsche Bank ended up selling its stake back to the firm. —Angela Sormani

North Carolina searches for new CIO

The North Carolina Retirement Systems is looking for an executive search firm to help it replace its chief investment officer, who was let go recently for unknown reasons.

Once the firm is hired, it will likely take four to six months to choose a new CIO, says spokesperson Heather Franco.

State Treasurer Janet Cowell terminated the employment of the CIO Patricia Gerrick in late August and subsequently announced several reforms at the state pension fund that she said are “designed to increase transparency and strengthen oversight.”

The new policies include a two-year revolving door ban prohibiting the treasurer, senior executive staff and key investment division staff from influencing and doing business with former colleagues at the state treasury for two years after they leave; a ban on direct third-party travel reimbursement from a contractor or investment manager doing business with the state; and full disclosure by external managers of their use of placement agents and fees paid to them.

Cowell has also hired advisory firm EnnisKnupp to conduct a fiduciary review of the pension fund and is expanding the investment advisory committee to include more financial experts. North Carolina is one of only three states that use a sole fiduciary to oversee its pension fund. The other two are New York and Connecticut.

The North Carolina state pension fund has a target allocation to alternatives, which includes private equity and hedge funds, of 4.5 percent. The actual allocation stood at 5.4%, as of Aug. 31.

Repeat pledges have gone to distressed debt shop Angelo Gordon & Co.; mid-market buyout firms Aurora Capital Group, Castle Harlan, Harvest Partners, KRG Capital Partners and Perseus LLC; funds-of-funds managers Horsley Bridge Partners and Parish Capital Advisors; and energy firm Quintana Energy Partners. —Nancy Gordon