LONDON - Despite a difficult year for fund-raising, Baring Private Equity Partners Ltd. raised $190 million in 2001 and closed three funds.
In raising the capital, London-based Baring obtained 74% of total assets from a core group of 40 investors as well as investors who have money in more than one fund. The repeat investors account for more than half of Baring's total $2 billion in assets under management. More than 80% of the capital is provided by third-party investors, including large institutions and pension funds; the remainder is provided by ING Group, Baring's parent, in the form of seed capital.
Pension funds invested in Baring's funds include the $55 billion State of Wisconsin Investment Board, Madison; the $17 billion pension fund of Citicorp, New York; and the Caisse de Depot et Placements du Quebec, Montreal, the largest pension fund in Canada with C$125 billion (US$ 79 billion) in assets. In the United Kingdom, investors in the L69 million pounds (US$ 98 million) pension fund of Clerical Medical, which is part of the Halifax Group PLC, West Yorkshire. Other institutional investors include TIAA-CREF, New York; INVESCO, Atlanta; and the European Investment Fund, Luxembourg.
"The important thing for us this year is we've completed the buildout of our international platform and now cover 17 countries with 65 investment professionals," said Christopher Brotchie, Baring chief executive officer, in an interview.
Investors in the Baring Asia Private Equity Fund II, which closed in December with $206 million, include CDP Capital, the investment arm of the Caisse fund, and INVESCO Private Capital Inc.
Mr. Brotchie said the Caisse was an "existing investor" in Baring's first Asia fund and came into the second one as well. The first Baring Asia fund, established in 1997, has returned more than $50 million in capital, representing an internal rate of return of 124% since inception.
The second Asia fund "will focus on fairly mature technology plays and infrastructure manufacturing," Mr. Brotchie said. Companies in Asia "have to invest in IT to interface with clients in Europe and the United States. Our basic strategy is (to invest in) information technology serving the growing manufacturing base in Asia."
The Baring Vostok Private Equity Fund raised $205 million before its closing in December 2001. The new private equity fund is targeted at investments in Russia, Ukraine and other newly independent states that were part of the Soviet Union. Investors in the fund include several large pension funds and investment companies from the United States and Western Europe.
The fund focuses on several core industry sectors including oil and energy, telecommunications, branded consumer products, media, services and technology. Investments will focus primarily on Russia and the Ukraine, which have more opportunities than other countries in the NIS region.
The first NIS Regional Fund, launched by Baring in 1994 with $160 million, has paid $231 million in dividends since inception and still owns substantial or controlling stakes in 10 companies. The average internal rate of return on Baring's 12 realized direct investments has been more than 70% per year.
Buy and build
Baring's Central European Fund had its second closing in December with more than $80 million in assets. The fund now has $170 million and follows a predominantly buy-and-build strategy in central and Eastern Europe. It invests in Poland, Hungary and other central European countries where it can find companies with experienced local management teams.
"Between the first and second closings, we were able to put a lot of money to work," Mr. Brotchie said. Central Europe "is not on too many people's radar screens."
Baring's exit strategy for its funds is "very much oriented toward trade sales," said Mr. Brotchie. Initial public offerings have "traditionally been a small portion of our exits," he added. Valuations were so high in 1999 and 2000, however, the firm wound up doing several IPOs, he said.
"But going back, it's been 80% trade sale," he said. Mr. Brotchie said the firm typically had been able to find "three or four large multinational (companies) that would want to acquire stakes in the companies in which Baring was invested."