Eurovision: Insights on US LPs allocating to European GPs and fund strategies

by Andrés Ramos, Content Marketing Specialist – Nasdaq Private Fund Solutions

After 2020, which saw London-based CVC Capital Partners take top spot for capital raised from US-based pension plans, data through the mid-year mark of 2021 from eVestment shows that interest in European fund managers and strategies remains robust.

As of 6/30/2021 the plans tracked by eVestment had reported 2021 commitments of over $10.3 billion to European strategies. Interest in the continent is spurred in part by pension plans seeking differentiated strategies from the crowded and frothy US market and more positive outlooks from consultants.

NEPC, for example, recently upgraded their view of European Growth Equity and European small/mid buyout from neutral to positive for 2021. The consultant’s negative outlook on large/mega buyout was also upgraded to neutral.

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Top European GPs raising from US-based pension plans

Fund Manager # of reported commitments collected Total reported commitments ($mm)
Intermediate Capital Group (ICG) 11 $1,828
Ares Management 5 $1,489
Nordic Capital 2 $591
CVC Capital Partners 2 $578
Charterhouse Capital Partners 4 $424

The majority of the commitments reported to Intermediate Capital Group (ICG) went to their ICG Europe Fund VIII. The fund is a private debt strategy focused on subordinated debt and junior capital in European middle market companies. Plans reporting commitments to the fund included Louisiana Teachers ($75 million) and Tennessee Consolidated ($240 million).

Also popular with public plans was ICG Strategic Equity Fund IV and its associated co-investment vehicles.

Ares Management saw the single largest reported commitment to a European fund from a pension plan via CalPER’s $1.1 billion commitment to Ares Capital Europe V, a direct lending strategy focused on middle-market European companies.

US-based pension plans committing to European GPs

Pension Plan # of reported commitments to
EU-based GPs
Total reported commitments ($mm)
New York State Common Retirement Fund 5 $1,654
Texas County 4 $397
LA County Employees Retirement Association (LACERA) 4 $367
New York City Teachers 4 $285
New York City Police 4 $233

The commitments from these plans ranged all asset classes and did not concentrate solely on large European buyout strategies which are sometimes the focus for US-based investors allocating capital in Europe. In addition to their $750 million commitment to ICG, New York State Common Retirement Fund also reported over $500 million in commitments to European infrastructure and real estate strategies. LACERA’s reported activity also included commitments to infrastructure (Antin Mid Cap Fund I) and real estate (Capman Nordic Fund III).

Moving into the second half of the year, investors will no doubt continue to seek to diversify their geographic exposure via European funds across their private markets portfolios.

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