There is a rising institutional confidence in the European private equity market with major institutions substantially increasing their commitments. Susan Scollan, head of private equity at Morley Fund Management, the main investment arm of UK-based Aviva (formerly CGNU), has recently seen her allocation to private equity doubled, following a restructuring of Morley’s alternative investments division. The main reason for this she says, speaking on an investors’ panel at the recent EVCA Symposium in Athens, is that private equity is one of the few areas where the group can achieve a performance above quoted market performance levels.
George Anson, managing director of HarbourVest agrees. Also speaking on the investors’ panel with Susan Scollan and Andress Goh, vice president of the Government of Singapore Investment Company (GIC), Anson said: “In today’s climate, expectations of IRRs from private equity are being adjusted down from 30 to 35 per cent to somewhere around 18 to 20 per cent over a ten-year period. But these are still very attractive compared with current estimates of around six per cent returns from the public markets.” HarbourVest is currently in fund raising mode and is about to close its fourth fund at $2.7 billion.
Andress Goh of GIC also outlined intentions at the conference to step up private equity allocations in Europe. The group expects to commit several hundred million dollars per annum to European investments, depending on opportunities.
Susan Scollan says the growing attraction of the European market is underlined by the fact that major institutions such as Morley and GIC are substantially increasing their commitments.
Morley is a long-standing investor in European private equity with investments dating back to the mid 1980s and a current allocation of around GBP1.2 billion. As part of a drive to expand its investment management activities, Morley, which manages assets of over GBP106 billion, has restructured its existing operations and established an alternative investment division. The division is headed by Philip Manduca and will include existing private equity funds, investment trusts and hedge funds.
Manduca believes there are huge opportunities for Morley to grow its alternative investment business by developing its existing private equity fund-of-funds product and launching a number of new private equity and hedge funds over the next few months. Morley’s main investment focus on the private equity side is to invest in UK and European private equity funds and to co-invest with them in selected deals. The current portfolio comprises some 75 fund investments and 50 direct/co-investments.