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Trust Insider: why it's worth going continental for PE exposure

by James Carthew on Feb 18, 2014 at 00:01

Over half of PEH is invested in leveraged buyouts (LBOs) but there is a 28% allocation to venture and the balance in special situations. PEH’s portfolio is spread across a range of industries and is fairly mature, which means it is positioned well if the IPO window stays open and M&A activity picks up this year (we’ll have to get past the current market wobble though).

It is worth remembering the NAV can benefit hugely from disposals – over the past 42 months, PEH’s average uplift on NAV two quarters before a sale to the day after a realisation is 53% on European investments and 31% on US investments. PEH is on around a 22% discount today and has a market cap of around £140 million.

French fancy

Altamir is quite a different animal. It is a larger fund than PEH, with a market cap of €400 million. Essentially, it is a feeder fund for LPs managed by Apax and, as such, is the only pure play on Apax’s performance available to most investors.

It is legally a French SCA, a structure that gives you tax benefits as a French shareholder.

As part of the structure, it is not allowed to be geared more than 10%. Like PEH it makes regular distributions: 2-3% of NAV annually. Crucially, it has grand ambitions to double its size from €500 million to €1 billion and, I think, to achieve that it will have to bring its discount down from its current level of 24%.

Altamir holds two series of Apax LPs – those managed by Apax Partners France, where the latest fund is Apax France VIII, which invests in the francophone areas of Europe, and those managed by Apax Partners LLP in London, investing in the rest of Europe, North America and some emerging markets and currently investing on behalf of Apax VIII LP.

The companies that the French fund holds tend to be smaller (€100 million to €1 billion) than those targeted by Apax in London (€1 billion to €5 billion). The industry focus is on technology, media, telecoms, consumer, healthcare and financial services, and they are investing in LBOs or providing growth capital.

They like to take control of their investments and aim to make 3x their money.

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