Institutions seeking exposure to international private equity will soon be able to draw on the combined experience of two of the most experienced players in the market, following the announcement of a partnership between Standard Life and Hamilton Lane Advisors. Standard Life will this year launch a fund-of-funds together with Hamilton Lane, which will act as joint adviser. The partners will seek to add GBP400 million (ecu 613 million) of external funds to the GBP250 million Standard Life will commit to the vehicle on its own account.
The fund-of-funds will focus primarily on Europe, but will have the ability to invest globally and will commit 60% of its capital into private equity funds and 40% directly into unquoted companies.
Standard Life, Europe’s largest mutual life assurer, undoubtedly ranks as one of the most experienced and successful European investors in private equity, having undertaken direct investments for more than 30 years and fund investments for over 12 years, while Hamilton Lane, one of the US’s most prominent gatekeepers, currently oversees approximately $14 billion (GBP8.4 billion) in commitments to over 300 private equity funds and direct investments worldwide. Standard Life’s private equity team is headed by Jonny Maxwell. The team will be further strengthened in April when David Currie, the Abu Dhabi Investment Authority’s senior investment controller for European private equity, joins Standard Life in Edinburgh to work on the fund alongside Jonny Maxwell.
Jonny Maxwell said the group had been evaluating the prospects for launching a third-party fund-of-funds for some time, though “not necessarily in partnership with another group”. However, when Hamilton Lane and Granville announced the end of their joint venture negotiations (EVCJ February/March 1998, page 16), the advantages of a Standard Life/Hamilton Lane link-up quickly became apparent to both parties.
Hamilton Lane had been exploring alternatives for establishing a foothold in the European markets for some time. The group’s chairman and CEO Les Brun said “what really attracted us to Standard Life was the length of their history in private equity investment, allied with their record of success”. Managing director Marcie Kennedy added, “We expect Standard Life’s position at the centre of European deal flow to enable us to access all the most interesting European opportunities”.
The reason for the collaspe of Hamilton Lane’s proposed joint venture with Granville, according to Les Brun, was not so much ownership but “agreement regarding who was bringing what to the table”. By inference, this time round the two parties have been able to arrive at a clearer understanding of the respective strengths each is contributing to the partnership – the unparalleled European private equity of Standard Life and the experience and discipline gained by Hamilton Lane in its role as advisor to some of the largest institutional investors in the US.
Although over the last couple of years Standard Life has been focusing mainly on the UK, it has continued to scrutinise European and other international offerings. Both Hamilton Lane and Standard Life now believe that, as a result of economic recovery on the Continent, the availability of good quality European product is on the increase.
Jonny Maxwell said both partners view the fund-of-funds as “hopefully the start of something bigger and broader”, and future products are already under consideration.
Marcie Kennedy reported that Hamilton Lane “has seen more and more interest on the part of US institutions in international product, including European funds”. Last year, roughly one third of Hamilton Lane’s deal flow was international.
Given the increase in transatlantic investor appetite for wider international private exposure, the US market will be a primary target for fund raising, but the offering is also expected to appeal strongly to investors in Europe and the Middle and Far East. The net will be cast far beyond Hamilton Lane’s existing client base. Marcie Kennedy explained “some of our existing client base will not find the fund appropriate because of their size, since they already invest directly in the sort of opportunity the fund will target, but there is an important subset of smaller clients trying to create a diversified portfolio which could potentially see this vehicle as an interesting opportunity”. Jonny Maxwell said one of the major strengths of the planned fund will be that it offers larger investors access to funds they might otherwise have swamped while providing a medium for smaller investors to gain exposure to vehicles they would have been excluded from as stand-alone participants.
The management of the fund will reside with a Standard Life owned and controlled entity (expected to fall within the newly-formed Standard Life Investment Management subsidiary), with Hamilton Lane acting as joint adviser; there will be equal representation on a four-strong investment committee. While Jonny Maxwell and David Currie will represent Standard Life, the Hamilton Lane representatives have not yet been named.
The Standard Life/Hamilton Lane fund-of-funds will be launched this summer. Meanwhile, Hamilton Lane expects to conclude fund raising during April for Hamilton Lane Private Equity Partners, a fund-of-funds being raised from non-US sources for investment in US funds. Les Brun said the fund is set to reach $150 million, one- and-a-half times its original target.