Darby Overseas Investments, the private equity and subordinated debt investor that focuses on emerging markets, has taken over the management of Dresdner Kleinwort Benson Emerging Europe, a $220 million private equity fund operating in Central and Eastern Europe.
The fund was set up in 2000 and managed by Dresdner Kleinwort Capital, the private equity arm of Dresdner Kleinwort Wasserstein. The two main limited partners in the fund are Dresdner Bank and CalPERS.
To date, approximately half the capital committed to the fund has been deployed, according to a source familiar with the situation. Last year, after DrKW had been acquired by Allianz, Dresdner and CalPERS took the view that the fund was underperforming and that a restructuring was necessary. As a result, new investment was stopped, and the then 11-strong team of professionals who managed the fund was reduced to three professionals.
The transfer of the fund’s management company to Darby was agreed after the restructuring had been completed, the source said.
Financial terms of the transfer were not disclosed.
Under the deal, Darby will manage the fund’s existing portfolio of four investments. According to the source, Dresdner and CalPERS have put in place a “significant” cash reserve in order to support the new manager in its effort to maximise the value of the underlying assets. “This isn’t a cut and run exercise,” the source stressed.
For Darby, the transaction marks the first engagement in Central and Eastern Europe, adding to existing franchises in Asia and Latin America.
Nicholas Brady, the firm’s chairman and former Secretary of the US Treasury, said in a statement: “We’re delighted to take this first step into a new region for us. Central Europe has exceptional promise, and we are eager to put the expertise we have gained in over ten years of principal investing to work in this part of the world.”
Following the transfer, Dresdner Kleinwort Benson Emerging Europe’s existing management team, led by Budapest-based Nicholas Kabcenell, will remain with the fund. In total, eight professionals located in Warsaw, Vienna, Budapest and Washington, D.C. will focus on the region, Darby said.