Standard Life Investments’ Standard Life launches quoted FoF

private equity team has rolled 19 of its fund-of-funds commitments into an investment trust, called Standard Life European Private Equity Trust plc, which will commence trading on the London Stock Exchange on May 29, 2001.

Jonny Maxwell, chief executive of private equity at Standard Life Investments, notes that the criteria for rolling its fund-of-funds commitments into this investment trust was that they were all valued in excess of GBP750,000. Typically the funds included are of 1995, 1996 and 1997 vintage and include names such as Apax, Candover, CVC Capital Partners, Charterhouse Development Capital, Phildrew Ventures and Scottish Equity Partners.

In return for rolling in the 19 fund-of-funds commitments Standard Life Investments will receive ordinary shares in Standard Life European Private Equity Trust plc to the value of GBP81 million, giving it a 51 per cent stake – the investment trust will raise GBP160 million in total. A number of institutions have already been hard circled to take up the remaining ordinary shares, issued at 100 pence per share. The net asset value of the trust post flotation is expected to be 98.6 pence per ordinary share after expenses are taken into account.

Doubtless the take-up on the trust has been positive because it is being launched semi-seasoned with a spread of well drawn down vintages as opposed to a shell under pressure to make commitments. The only comparable vehicle to Standard Life European Private Equity Trust plc already in the market is Pantheon International Participations plc which is also an evergreen fund that invests in secondary private equity positions. However, as the names indicate PIP is international, whereas Standard Life Investments’ new vehicle invests only in European funds.

Standard Life European Private Equity Trust plc, once fully committed, is expected to have 35 underlying fund investments – primarily in the mid-sized MBO funds, although some larger MBO funds may be selected in the future.

This is the second major shift in the way Standard Life Investments manages its private equity operation that has been concluded within the last 12 months. In October last year it closed the e868 million European Strategic Partners Fund, which, like Standard Life European Private Equity Trust plc, is a fund-of-funds vehicle, although European Strategic Partners is not structured to achieve a listing. Another key difference is that European Strategic Partners is split 60:40 between fund and direct investments; Standard Life European Private Equity Trust plc will not make direct investments.

Maxwell anticipates that European Strategic Partners Fund will have successor funds but for the time being Standard Life Investment’s private equity work rests with European Strategic Partners, the new investment trust, the smaller fund-of-funds commitments that were not rolled into the investment trust, and a number of direct investments. Since the launch of European Strategic Partners Fund all of Standard Life Investment’s direct investments are done through this third-party fund.

Initial reaction received by Maxwell refers to his timing post Myners report, but as Maxwell points out, there has not been sufficient time for this to be the case. However, plans already afoot at Standard Life Investments were given a boost by some of the report’s findings.