Swiss FoFs To Start Making Commitments Again

Castle Private Equity will start making fund commitments from its Swiss listed fund of funds again in 2010 following a year’s hiatus. The fund also appears to be heading for an additional listing on the London Stock Exchange.

Castle Private Equity, which is weighted toward U.S. and European buyout funds, stopped making commitments at the end of 2008 to protect its balance sheet and conserve funds amid the financial downturn. The group stated that it would not be making any new commitments until cash distributions and capital commitments returned to better balance.

The firm is in a good position to start make new investments, with around $90 million remaining from an existing credit facility that was extended by $30 million to a maximum of $150 million in June last year. The expanded facility was put in place in order to facilitate a revival of investment activity. Historically, Castle Private Equity has an over-commitment strategy to its private equity portfolio and is generally overcommitted between 50 percent and 80 percent of its NAV. At the moment that figure stands at 53 percent of NAV.

Edward Cartwright, head of listed investment company business development for Castle Private Equity’s fund manager LGT Capital Partners, said that the vehicle needed to re-start investment activity to make sure the portfolio has the right spread of vintages. There are a few transactions in the pipeline that have been identified for this year, but he said it was too early to comment on any of them. The vehicle will continue to have a major focus on the buyout sector, with a bias towards the European mid-market.

Castle Private Equity has a globally diversified portfolio with a 40-40-20 percent target exposure to the United States, Europe and Asia respectively. By sector, buyouts dominate, accounting for over half of the portfolio’s value (59 percent). Small and mid-market buyouts form the largest part of the buyout portfolio. Venture accounts for 19 percent and distressed and balanced investments for the remainder. Examples of US buyout funds in Castle Private Equity’s portfolio include CD&R VII, First Reserve XI, TPG IV and TPG V and Warburg Pincus VIII.

At the end of January, Castle Private Equity’s total net assets were $510.1 million. The group had uncalled commitments of $274 million (53 percent of NAV). Cash and unused credit lines cover around 35 percent of uncalled commitments. An improved second half in 2009 has bolstered the portfolio, with NAV rising 11 percent since bottoming in June.

Another potential boost to the vehicle’s coffers is a proposed listing on the LSE. The board will be holding a meeting in the next week and further details will be announced in due course. A listing was originally planned for the first quarter of 2009, but the move was put on hold in light of uncertainty in the financial markets.

Castle Private Equity has been listed on the Six Swiss Exchange since 1997. According to a media presentation by Castle Private Equity’s lead portfolio manager Hans Markvoort, several market practitioners have already expressed an interest in purchasing the company’s shares on the LSE. Castle Private Equity hopes to follow in the success of its sister company, hedge fund manager Castle Alternative Invest, which was successfully listed on the LSE in June 2009.

Markvoort has been Castle Private Equity’s lead portfolio manager since 2000. He is supported by LGT Capital Partners’s private equity research and investment teams of over 35 experienced professionals based in Pfaeffikon in Switzerland, Hong Kong, New York and London. LGT Capital Partners manages $18 billion in hedge fund and private equity assets and has an international team of more than 160 professionals.