Munich Private Equity closes third buyout fund-of-funds

Clifford Chance provided legal advice on the fundraise for the Luxembourg-domiciled vehicle.

The firm's relationship with cornerstone investor RWB means that it is able to commit capital at an earlier stage, David Schäfer, managing partner a MPEP, told Unquote: "We launch mid-market-focused fund-of-funds programmes regularly – this was our first proactive fundraising with third party investors. After we fully allocated the capital from our cornerstone investor, we reach out for capital from additional institutional investors. We stopped approaching institutionals in November 2019 – some wanted to use their 2020 allocation, so we kept it open for them."

MPEP III held a first close in December 2018 on €50m and had committed to seven funds as of the first close. The firm launched the fundraising process for external institutional investors in February 2019.

The GP's predecessor vehicle held a final close in June 2015 on €238m, although the GP did not engage in an active fundraising process for commitments from external institutional investors, unlike MPEP III.

MPEP has now committed €900m across almost 85 funds.

According to a statement, as of 30 June 2020, the 109 exited portfolio companies from MPEP's previous fund investments have generated an average gross multiple of 3.1x on invested capital.

MPEP generally launches a new vehicle every 18 months. The GP's next fund, MPEP IV, was registered in May 2018, according to publicly available documents. The fund is expected to start fundraising soon.

Investors
As in the GP's previous vehicles, RWB is the fund's cornerstone investor, but MPEP has also been open to commitments from third-party institutional investors. The investor base comprises European investors from Germany, the UK, Italy and Spain, as well as from Israel, including pension funds, family offices, a UK university and an Italian bank.

The fund is targeting double-digit net returns of 15% plus. The GP commitment stands at 1% of fund volume and the minimum commitment for investors was €1m, with a maximum of €20m.

Investments
The fund will focus on mid-cap buyout funds in Europe and the US, and will make average commitments of €10-15m. 

"We provide access to successful funds in the US and Europe where it is hard for new investors to get in," explained Schäfer. "Our goal is to create suitably diversified portfolios in terms of vintage years, sectors and number of funds, while still capturing the outperformance potential through only partnering with the best managers, rather than creating over-diversified fund-of-funds portfolios with market average returns."

The firm does not plan to change its investment strategy in the wake of the coronavirus crisis, Schäfer said. "We won't change our strategy as it has worked well so far and our managers have shown also very stable returns in former crises  – although we would probably not commit to a plain vanilla consumer fund."

The fund plans to make 20 investments in total and has already completed 14. According to Unquote Data, the fund has so far invested in vehicles including PAI Europe VII, to which it committed €8m, as well as Corpfin Capital Fund V.

The fund has a strong pipeline, Schäfer told Unquote. "We expect to have 16 investments in the portfolio relatively soon as two new investments have investment committee approval. We have good visibility for additional targets in the next six to nine months and expect to be fully deployed by Q2 next year."

People
Munich Private Equity Partners – David Schäfer, Christopher Bär (managing directors).

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