It is not an easy ride for a first time fund in the current climate. Newcomer Barlage Knoth & Cie (BKCie) has found this out the hard way and has withdrawn its fund raising efforts after it failed to raise the remaining €20 million it needed for a €75 million first close of its maiden €175 million fund. The fund was to target typical low-growth industries such as mechanical engineering, electrical engineering and automotive supply businesses in German-speaking countries.
The team joined forces last year and although it had secured a cornerstone investor, the fact that the team had not worked formally together in the past prevented the fund from attracting investors.
Frank Hock, managing director of the firm, said: “We experienced as a team that a first time fund isn’t accepted by investors in times like 2002/2003. The whole team hasn’t worked together in the past and so hasn’t a past track record and although we had secured commitments we lacked €20 million for our first close and so had to withdraw from fund raising.”
There are no plans to resume fund raising. “We gained the impression that regardless of the fact that good times will return, in the future a first time fund which hasn’t got a team with a past track record of working together will have a very tough time.”
The team is certainly not lacking in experience. The firm was founded by five individuals; Dr. Hans Albrecht, who set-up Carlyle’s German operations and then founded Nordwind Capital Partners. Dr Tonio Barlage, former chief operating officer and president of the Sauer Group; Dr Bernhard Heiss, a partner at Freshfields Bruckhaus Deringer and managing director Frank Hock. Hock was previously director of structured finance and structured investments at Sal Oppenheim where he structured a private equity fund and fund-of-funds for the group. The final founder is Rainer Knoth, a member of the board of Bayerische Hypo-und-Vereinsbank.
EVCJ looked at the attraction of first time funds to institutional investors last year – see LP Corner October issue, page 46. Hock said then that of the institutional investors the firm had approached during the course of its fund raising around 20 per cent said they would not invest in first time funds.
First time funds will always hold a certain attraction to investors, but Hock adds: “I think certain institutional investors have to ask themselves whether this attitude they have only to court experienced teams with a track record is the right attitude.”