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F&C completes first close of the Aurora Fund

F&C Private Equity, the private equity fund of funds division of F&C Asset Management, has completed the first close at EUR30m of the Aurora Fund, a new fund specialising in acquiring secondary interests in predominantly European private equity funds.

Investors in the Aurora Fund include UK and Dutch pension funds.

F&C believes that the European mid market offers one of the most attractive areas for private equity investment. The firm has been investing in European buyout funds, mezzanine and co-investments through its listed vehicle, F&C Private Equity Trust, for many years. The trust’s portfolio of European buyout and mezzanine investments achieved an IRR of 24.2 per cent between 2001 and 2008.

The private equity market has seen a dramatic decline in activity since last year’s banking crisis but F&C says there remains interest and activity in the European mid market. Within this segment, many are attracted to the secondary market where private equity funds are acquired some years after establishment, often at a significant discount to asset value, with the effect of shortening the investment period and enhancing returns.

In recent years F&C has been active in the secondary market acquiring over EUR45m of secondary positions since 2004 generating an IRR to 31 December 2008 of 32 per cent.
 
On 22 October 2009 F&C Private Equity completed its first acquisition for the Aurora Fund. On behalf of its clients, F&C has acquired Icelandic bank Landsbanki’s private equity fund interests, representing the whole of Landsbanki Private Equity Fund I and a substantial part of Landsbanki Private Equity Fund II. Together this represents over EUR65m of original commitments, making it one of the larger secondary transactions carried out during 2009.

Landsbanki Private Equity Fund II, which has a number of Icelandic investors, will continue to be managed by Landsvaki, the asset management arm of NBI hf. in partnership with F&C. The Landsbanki private equity fund interests will comprise the Aurora Fund’s initial portfolio.
 
Hamish Mair, head of F&C Private Equity, says: "We are delighted to have acquired an attractive portfolio of European mid-market buyout funds which was put together by the well regarded private equity funds team at Landsvaki and at the same time provided a solution which protects the interests of the other investors in Landsbanki Private Equity Fund II while relieving Landsbanki of a substantial amount of undrawn commitments. This transaction represents a welcome opportunity to profit from the credit crisis. The combination of the mid market focus and an attractively priced secondary transaction gives us an excellent prospect of delivering strong returns to the fund’s investors over the medium term. The transaction has been complex but we believe it delivers a good outcome for all parties.”
 

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