CASE STUDY

Private Equity Fund of Funds

Italian Pension Fund | Spring 2020

Engagement at a glance

Private Equite Fund of Funds

An Italian Pension Scheme seeking to allocate EUR 100mn to a private equity solution that would generate a net IRR above 7% per year, investing across private equity primary fund investments, secondaries and co-investments through a Fund of One.

Client-specific Concerns

The investor wanted to ensure a fast pace of deployment - around 40% in year one and 30% in each of the subsequent two years. Investing in a combination of primaries, secondaries and co-investments was intended to facilitate this rapid pace of deployment as well as providing diversification. In addition, while global exposure was targeted, the investor expected at least a 40% allocation to Europe and had a preference for a specific allocation to Italy.

Outcome

  • Analysing a large universe of fund-of-fund managers. The broad scope of the mandate, combined with the investment size, provided access to a large universe of Managers with capabilities across the three sub-strategies and well-established fund of funds platforms who were willing to offer the Fund of One solution.

  • Sub-allocations to primaries, secondaries and co-investments. Analysis and discussion helped to determine the appropriate sub-allocations across the three areas, based on return targets and preferred deployment speed.

  • Understanding local geographic experience. Managers proposed allocations to Italy in order to meet the investor’s preference, but specific analysis was conducted on track records and pipelines in this area to determine whether the approach was viable.

  • Well-established platforms. Managers with well-established fund of funds platform were significantly advantaged through this search, providing not just a solution to the investor but key value-added services such as knowledge transfer, development of the client’s in-house capabilities and direct contact with investment professionals across these platforms.

Our specialist says

  • Solutions that invest across the spectrum of sub-strategies, in primary fund investments, secondary and co-investments are a great way to gain initial exposure to private equity asset class. Each strategy can provide numerous benefits, from diversification to altering the cash flow profile, with customisation available to meet very specific needs of investors.