Schroders launches listed FoFs

Schroders plc and Schroder Ventures International Investment Trust plc have together launched the firm’s first listed fund-of-funds vehicle, which aims to raise E250million to E300 million and will be listed on the Dublin Stock Exchange.

The vehicle has been known to be on the cards since March this year when Schroder Ventures London Ltd and Schroder Ventures North America were sold to Schroder Ventures International Investment Trust, which is 12.8 per cent owned by Schroders plc. This effected a reorganisation that enabled the Schroder Ventures London and North America teams to enter the fund-of-funds business without the conflict of interest problems that would have arisen had they remained with Schroder Ventures, which itself receives considerable support from the fund-of-funds industry. See evcj April p16.

The fund-of-funds vehicle has already made commitments worth E160 million to 12 funds. The aim is to invest in at least 20 private equity funds, primarily in the US and Europe, and achieve a potential underlying portfolio of 250 companies. The 12 funds so far are Austin Ventures III, CVC European Partners III, Electra European Fund, First Reserve IX, Index Ventures II, Madison Dearborn Capital Partners IV, New Enterprise Associates X, Schroder Ventures European Fund II, Summit Partners VI, Welsh Carson Anderson & Stowe IX, The Third Cinven Funds and The Japan Venture Fund III.

“The listing enhances the potential for liquidity and with differential minimum investment thresholds and pricing, it should prove attractive to both small and large institutions and high net worth individuals,” says Andrew Sykes, head of alternative investments at Schroders. The minimum investment threshold is E125,000.

In common with the accepted practice of over-commitment – taking advantage of the fact that, generally, only up to two-thirds of the full commitment to a private equity fund is drawn down at any one time – Schroders fund-of-funds vehicle will over commit up to 130 per cent. Schroders has arranged a borrowing facility to cover any potential funding shortfalls caused by the over commitment strategy. It’s unclear whether longer investment horizons will have a significant impact on the two-thirds drawn theory.