Unigestion holds first close for Direct III, eyes EUR 1bn target

The predecessor vehicle in the strategy, Unigestion Direct II (UD II), held a final close in July 2021 on EUR 611m, as reported.

The fundraise for UD III was launched in June 2022, as reported. The vehicle falls under Article 8 of the EU Sustainable Finance Disclosure Regulation (SFDR).

“We’re very pleased to have achieved the first close, demonstrating the confidence that our investors have in our strategy,” Paul Newsome, head of portfolio management, private equity at Unigestion told Unquote, acknowledging the tough fundraising climate. “Clearly, investors have a lot on their minds at the moment. Not only are there a lot of funds out there right now, but LPs have concerns with their own portfolios, such as the denominator effect and the prospects of distributions slowing down. Therefore, we are proud that they have entrusted their capital in our fund.”

The fundraise will progress following the first close. “We have a EUR 1bn target and we would typically expect to raise over 12-18 months as some LPs prefer to come in at later closes, including specific programmes that we manage which due to their own timing will commit to the fund at a later stage,” Newsome said. “We’re expecting to hold closes every two or three months.”

Unigestion registered its debut Climate Impact Fund in June 2022, as reported. The vehicle will see the GP refine its focus on climate impact as a sector.

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

Unigestion is expecting to announce a first close for its Climate Impact Fund shortly, and will hold subsequent closes for its latest Emerging Managers Fund, Newsome told Unquote.

Investors
At the first close, the LP base of UD III comprises existing investors from Germany, the UK, Switzerland and France, Newsome said. The fund’s LPs include public pension funds, insurance companies, corporations and family offices.

“We were targeting our existing investors for the first close and we’re doing a broader outreach as we speak,” Newsome said. “We’re expecting to have a similar base of investors to our prior funds, across Europe, the UK, the US, Asia and Australia. We expect our existing investors to come back, and we expect to add new investors in every fundraise, which is always healthy.”

Investments
UD III expects to make 40 deals, with an average equity ticket of EUR 25m but EUR 10m-EUR 50m available per deal. The vehicle will make direct investments and co-investments in mid-market companies, focusing on themes including healthcare, service efficiency, future of work and sustainable cities.

The fund’s first investment is in a US-based substance use treatment provider, Newsome said; the second is in the process of closing and is in a European pharma business.

“We have a good pipeline, but obviously we are keeping the bar very high in this environment,” Newsome said. “We continue to look for resilient businesses that play our investment themes and have long-term growth prospects, irrespective of the macro environment.”

Investments from the GP's previous Direct fund include Germany-based organic bakery chain Zeit für Brot, a portfolio company of Afinum, as reported.

UD III's investment process will integrate the GP’s PEpper (Private Equity Predictive Performance) machine learning tool, allowing the GP to identify the best potential investments alongside the work of its investment team.

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

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