Phildrew Ventures has gained its independence from UBS Capital. The five partners who formed the venture prior to its incorporation into the Swiss bank in 1999 have agreed a settlement securing its independence. The new venture, IRRfc, aims to find exits for private equity investments.
UBS, which acquired Phildrew as part of Phillips and Drew Fund Management in 1998, has made drastic cuts to its private equity commitments following hefty write-downs last year. It is winding up its UK private equity operations after failing to get a proposed fund off the ground. Frank Neale said: “We believe we have identified a gap in the private equity market. There are a number of institutions that entered private equity in the 1990s which have had a recent change in strategy and now find it very difficult to exit from their investments.”
Ian Hawkins, Robert Jenkins, Ruth Storm, Frank Neal and Chris Tennant (whose initials make up the new name IRRfc) funded the buyout from their own resources, although details of the deal were not disclosed. The group has worked together since 1988 with associations going back to 1983. In exchange for a management fee and carried interest the firm will manage the unwanted private equity portfolios of institutional investors with the aim of securing profitable exits.
“A number of banks, insurance companies and pension funds have private equity portfolios that are under-managed. These institutions got into private equity then made a strategic decision to stop investing, or people left and the quality of management went down,” says Neale. Secondary players will not touch these assets without a management team in place but once this has been done IRRfc may look to them for exits. Not all of these investors are looking for instant liquidity but rather the management and administrative services IRRfc can offer. Neale says although they are not looking for distressed assets in particular he expects many of the investments will fall in to this category.
IRRfc will continue to advise the remaining portfolio investments from the Phildrew Ventures Third, Fourth and Fifth Funds, which have a total value of just over £300 million. UBS was a major investor in the last fund, raised in 1999, and will still own the assets, which Neale expects IRRfc to manage for another three or four years. The firm will not make any new investments. Potential customers for the service offered by IRRfc include banks, insurance companies, pension funds, corporate venturers, secondary investment funds and venture capital firms.
In February, the management team of UBS Private Equity SA, UBS’s Paris-based private equity operation led by Hervé Marion, also secured its independence. The new company is called Avesta and will continue to manage its UBS investments as well as raising a new €200 million fund with a similar investment strategy.