Union Investment has successfully completed the subscription phase of the private equity fund of funds PE-Invest 3. EUR 312 million has been raised in the last three months from institutional investors to be invested in unlisted companies. PE Invest 3 will invest globally in private equity funds and add secondaries and direct investments for diversification and return purposes.
The fund will focus on private equity funds specialising in small and mid-caps in the US and Europe. It will also invest in Asian companies, venture capital, and turnaround equity stories. PE-Invest 3’s goal is to achieve attractive, risk-weighted and long-term returns at lower volatility than on the equity markets. The fund plans to invest in 15 to 20 funds, which, in turn, are expected to hold stakes in more than 300 target companies. Union Investment has outsourced the portfolio management of PE-Invest 3 to the Swiss investment boutique Unigestion.
“Private equity is particularly attractive for institutional investors in the current low-interest-rate environment, as unlisted equity stakes can usually be acquired at more favourable valuations than listed shares. Moreover, private equity has traditionally been relatively uncorrelated to traditional asset classes, which allows investors to enhance their risk-return profile,” says Klaus Bollmann, managing directors and head of product management at Union Investment.
With PE-Invest 3 Union Investment and Unigestion continue the series of private equity funds for institutional investors which started in 2005. Under their partnership, Unigestion offers market access and corresponding know-how in selecting private equity funds and in identifying and executing attractive secondary transactions and direct investments for PE-Invest 3. This process ranges from market analysis and detailed due diligence to investment recommendations and implementation. Unigestion offers its extensive private equity expertise, above all in the small and mid-market segments, with their attractive risk-reward ratios. Union Investment has set up the optimal investment vehicle, implemented a suitable risk model, and administers the fund. In addition, Union Investment makes all necessary regulatory key figures and reports available to investors. Unigestion und Union Investment also invest their own money in new funds.
“The planned PE-Invest-3 portfolio meets the requirements of a balanced mix of private equity strategies and global geographical diversification, which are all needed to be successful also in challenging economic times,” says Kay Olschewski, fund manager of PE-Invest 3 at Unigestion.
“Investors who subscribe to PE-Invest 3 must be long-term-oriented, as private equity investments need a certain amount of time to put strategies to work,” Bollmann says. PE-Invest 3 has a 12-year investment horizon, plus the option to extend it by two one-year periods. Investors’ average lock-up period is seven to eight years.
