Unigestion launches third Direct fund with EUR 1bn target

Unigestion Direct III was registered as a Luxembourg-domiciled vehicle earlier in June.

“It’s difficult to pin down a first close time as of yet – it could be pre- or post-summer, depending on our existing investors,” Newsome said. “We have been doing our premarketing and have now done the regulatory filing, our virtual data room is full, so we can fundraise in earnest.”

The predecessor vehicle in the strategy, Unigestion Direct II, held a final close in July 2021 on EUR 611m, as reported. The fund held a first close in 2019 and was 40% deployed at the time of its final close.

Newsome told Unquote that it decided on a EUR 1bn target for the next vehicle following LP feedback. “We invested our previous fund quite swiftly, and see a huge amount of dealflow, so this makes sense,” he said. “We haven’t yet set a hard-cap as this will likely happen over the course of the fundraise.”

Given the amount of dealflow that it sees, Unigestion is increasingly deploying machine learning tools to manage its workload.

The AI-based tool has been developed over the past few years and uses data from the GP’s historical track record, Newsome told Unquote. “The tool predicts outcomes based on 40 variables in the deal, including the company, the investment partner, and the sector,” he said. “The tool gives an accurate prediction on whether a deal can perform across a certain return hurdle, so we can quickly decide which deals we should spend more time on and which ones we should reject outright. It does not replace human due diligence, but it helps us say no quickly and gives us more conviction on the attractive deals. The system has been trained with more than 1,500 deals and it’s performing with more than 80% accuracy.”

Unigestion Direct III is an Article 8 fund within the EU Sustainable Finance Disclosure Regulation (SFDR).

In addition to its new Direct fund, Unigestion is also on the road for vehicles including its second Emerging Managers Choice fund, according to Unquote Data. The fund has a EUR 300m target and will make a mixture of fund and direct investments with European emerging managers.

According to Newsome, the GP is preparing for the final close of Unigestion Secondary Opportunity V, which has a EUR 700m target.

Investors
“We will probably have more LPs in this fund than in the last one, but it will be a similar make-up to that one and to our latest secondaries fund, which is just having its final close now,” Newsome said. “We’re expecting a combination of pension funds, insurance companies, wealth managers, and some financial institutions. We’re likely to have an overweight in Europe, where we have been traditionally strong, but we will also have US, Asian and Australian investors.”

Unigestion’s standards GP commitment is 1%, Newsome said.

According to Unquote Data, LPs in the previous Direct fund include the North East Scotland Pension Fund (NESPF). The fund had around 40 LPs at the time of its final close, with around 75% of its commitments from existing investors, as reported.

Investments
Unigestion’s third Direct fund will target mid-market companies with EVs of up to EUR 1bn, with a EUR 200m-EUR 500m sweet spot. It will invest in North America (40%), Europe (40%) and the Asia Pacific region (20%), Newsome said.

Unigestion’s Direct strategy sees the GP invest alongside other parties, which also assists the GP with its deal sourcing. “We work with our network of more than 700 investment partners, which are a combination of our existing fund managers that we know well, fundless sponsors, and even entrepreneurs and industry experts,” Newsome said. “We source around 500 deals a year through this.”

The fund expects to make 30-40 deals in total, with average equity tickets of EUR 20m-EUR 30m. Our of the dealfow that it sees, the fund is expected to make 12-15 deals per year, according to Newsome.

Although it invests in cooperation with investment partners, the size of stake that the GP can take will vary, Newsome said. “We’re not shy about taking a majority stake in a deal – although our classical co-investments are minority stake investments, we have done majority deals in the previous funds and will continue to do these in the new fund.”

Unigestion will invest in line with its seven core investment themes, Newsome said. These include resource efficiency, the future of work and healthcare.

This thematic focus should help the GP to mitigate the current macroeconomic environment, according to Newsome. “We are in a challenging environment with changing global growth rates, the spectre of inflation, and increasing interest rates,” he noted. “But the companies we are targeting are well suited to this environment, since our investment themes look for growth that is not correlated to GDP. Our portfolio companies tend to be in attractive niches so they have pricing power. And we don’t use a lot of leverage so they’re not subject to the impact of higher interest rates.”

Investments from Unigestion Direct II include Netherlands-based medical devices clinical research organisation Avania, as well as Croatia-based business cloud communications platform Infobip, according to Unquote Data. The fund built a portfolio of 30 companies during its investment period and generally deployed equity tickets of EUR 10m-EUR 25m, according to Unquote Data.

People
Unigestion – Paul Newsome (head of portfolio management, private equity); Christophe de Dardel (head of private equity).

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