Rothschild closes private equity secondaries fund
The merchant banking division of the Rothschild Group has completed the final closing of Five Arrows Secondary Opportunities III (FASO III), a European mid-cap secondary fund, at €259m, as it surpassed its €200m target after only a few months of fundraising.
The bank said the Paris-based fund attracted strong interest from international investors including banks, insurance companies, family offices and a sovereign wealth fund. FASO III has also completed its first transaction, following the purchase of a diversified portfolio of 17 European small and mid-cap companies from an un-named financial institution.
The fund specialises in European small and mid-cap secondary private equity transactions, with a management team of eight led by general manager Mireille Klitting.
Marc-Olivier Laurent, head of Rothschild’s Merchant Banking division, said the “easy” fund raising effort, in a gloomy economic environment, “confirms that innovative private equity funds remain high on the agenda of investors seeking opportunities that can preserve capital and also generate alpha in an adverse cycle”.
The fund’s focus on tailored liquidity solutions in a market segment that falls below the radar of large publicised auctions, presents significant opportunities, he added. “We expect the current market environment will generate a steady flow of opportunities from sellers seeking liquidity driven by economic uncertainty, new regulatory constraints or simply the need to exit the asset class.”
Klitting said the specialist nature of the segment requires specific expertise. The fund purchases either existing limited partnership interests or portfolios of underlying direct companies. Complex direct portfolio acquisition is a particular expertise of the FASO team.
“Purchasing mature portfolios of funds, shares or direct companies significantly mitigates the risks associated with private equity investing. It offers a mix of attractive returns with a quicker payback which de-risk transactions early on following the deployment of the capital,” she said.
Rothschild Merchant Banking division, which manages more than €3bn of funds globally, deploys the firm’s capital alongside that of trusted partners, primarily in European opportunities. Since 2008 it has developed a range of vehicles using instruments ranging from senior debt to equity.
Apart from Klitting, the FASO investment team comprises COO Antoine Bougnoux, investment director Benoit-Olivier Boureau, investment director Benjamin Bréard, investment director Laetitia Beillard and associate Jonathan Bayle. All were formerly at Natixis Private Equity.