3i makes cornerstone investment in SVG fund

3i, a London-listed private equity firm, has invested in SVG Capital’s second fund dedicated to private equity-style investments in public companies.

3i, a global private equity firm, has made a commitment to Strategic Recovery Fund II, an SVG Capital fund applying private equity techniques to public companies.
 
Adam Steiner, head of research, public equities at SVG Capital, declined to comment on the amount 3i has committed to the fund, but said that the firm is a “cornerstone investor” in Strategic Recovery Fund II.
 
As part of the investment, 3i managing director Alan MacKay will join SVG’s advisory board.
 
The fund invests in public companies using “private equity techniques”, including in-depth deal sourcing and evaluation and input from experienced industrialists.
 
Steiner said that the fund held a first close of approximately £35 million (€52 million; $65 million) in September, more than twice the total size of the first fund, which raised £15 million in 2004 and has fully returned its capital. SVG Capital has also invested in the second fund, which is expected to hold a second close before the end of the year and has a target of £60 million.
 
Strategic Recovery Fund made eight investments in total, according to Steiner, generating an IRR of 41 percent: “The first fund was designed as a test bed so it was shorter in its life span, but all the investments were successful, with the a minimum money multiple of 1.4 times.”
 
Steiner declined to comment on other limited partners in the fund, but said that the firm was aiming for a “global investor base” and that the majority of investors in the first fund would reinvest in Strategic Recovery Fund II. A source close to SVG Capital said it is also expected to market the fund in the US where the product is more mature and better understood.
 
As part of the fundraising, SVG Capital appointed Oksana Yesina, previously at PricewaterhouseCoopers, and Stuart Widdowson, a former associate at HgCapital, over the summer.

Knight Vinke Asset Management is another corporate governance-driven investor, which pushes for change at the companies in which it invests. The firm was vocal in its attempts to block an €8.7 billion private equity buyout of Dutch media and marketing group VNU earlier in the year. Knight Vinke Asset Management is backed by CalPERS, the largest pension fund in the US, which said that corporate governance was its best performing asset class, according to a recent article in the Financial Times.