NatWest Equity Partners Eyes LP Fund Market

NatWest Equity Partners (NWEP) is preparing its first external LP fund. Although a late entrant to the third-party vehicle market, the firm already manages funds for a number of major portfolio clients, including Rover Group and Shell, as well as the Gartmore funds, which came under NWEP management when its parent bank acquired Gartmore early in 1996.

Currently, NWEP has approximately o1 billion (ecu 1.5 billion) under management, about GBP400 million of which is client money. The firm is at a point where external money accounts for approximately 50% of new capital invested.

Christopher McCann, NWEP director responsible for European investment, said the group has decided that to develop its international private equity business strategically, it needs to raise a significant fund from a wider range of external investors for investment throughout Western Europe.

NatWest Equity Partners, which has operations in France, Germany, Italy and Spain in addition to its seven offices in the UK, will aim to raise a minimum of GBP350 million for the fund. Existing clients are expected to commit additional resources to bring a minimum total of GBP700 million of new capital under management by the time the fund closes during the course of 1998. Managing director David Shaw said that the investment ratio of the LP fund to other NWEP-managed capital would be somewhere between 60:40 and 40:60, depending on the eventual size of the fund.

The level of new funds NWEP is seeking to bring under management is in line with its current spend rate. The group, which forecast disbursements of GBP250 million for 1997, had made new investments totalling GBP234 million in the 11 months to end November; this compares with GBP285 million invested in 30 new deals during 1996.

Though NWEP will go out to the market after two successive years of unprecedented levels of capital raised for European buyouts, institutional appetite for exposure to European private equity, particularly among US groups, has shown no signs yet of abating. And, although the offering will technically be a first-time fund, the group has a long-established track record and, according to Christopher McCann, can demonstrate upper quartile performance. These factors suggest that the fund-raising exercise is unlikely to be unduly protracted.