MPEP launches fifth buyout fund-of-funds with EUR 300m target

“We’re not planning on launching any additional strategies or business lines for now as we want to continue to fully focus on optimising the outcome of our flagship fund-of-funds,” Moritz. “It might be naive in a world focused on growth, but we prioritise and take pride in returns over AUM growth.”

The GP has continued to develop its ESG strategy as it has raised its funds. Its fifth fund programme will continue to comprise separate vehicles for each of its two investment regions, each of which will be classified as Article 8 under the EU Sustainable Finance Disclosure Regulation.

“There might be different options on that matter, but we clearly believe that ESG is here to stay,” said Moritz. “While we have been considering ESG criteria in our investment decisions for almost a decade now, we still upgraded our approach with the support of external consultants to make it more tangible and also align with current regulation.”

“The entire industry is moving from formulating general beliefs to what you actually do and how you track it,” added Bär. “The biggest challenge right now is the scarcity of data as well as the lack of standards and guidance.”

The firm’s previous buyout programme held a final close in December 2022 on EUR 392m, surpassing its EUR 300m target, as reported. This marked a significant step up from the EUR 162m that it raised for its third vehicle, which was its first to secure commitments from external investors, beyond previous anchor investor RWB Group.

Between 1 January 2016 and 31 May 2023, GP’s funds have generated an average gross multiple on invested capital (MOIC) of 4x across all 83 full realisations, the firm said in the statement.

Investors
The firm’s existing limited partner (LP) base includes pension funds, insurance companies, asset managers, banks, foundations and family offices, it said in the statement.

“We started building our LP base in Germany and Spain, then expanded to the Nordics, the UK and the Netherlands and will be continuing to broaden the geographic footprint with a focus on Europe but potentially also beyond,” Moritz said.

Investors will continue to be able to tailor their European and North American exposure across Fund V’s two vehicles. The programme will aim to provide LPs with exposure to access-restricted, sought-after managers.

Investments
The firm’s fifth fund will follow the strategy of its predecessor vehicles, making commitments to 10-12 lower mid-market buyout funds in each of its two regions of focus. The firm has typically made commitments of EUR 10m-EUR 15m per fund, as previously reported.

The GP is aware of the market that it is deploying into, however, and intends to back its winners. “One subtle change in our approach going forward is that our portfolios might be slightly more concentrated given our high conviction in the quality of our fund managers and our confidence in achieving our fundraising targets,” said Bär.

The number of new relationships that the firm will take on with each fund varies, said Moritz. “It is important to honour relationships but also constantly challenge existing partnerships as we won’t settle for second best,” he said. “Sometimes people leave and successors fail to live up to expectations, managers might not be ‘hungry’ enough anymore or strategies lose their edge in an increasingly competitive market.”

Due diligence will therefore continue to be an important factor for the GP in selecting where to allocate for both new and existing relationships. “Some investors do lighter underwriting for their second commitment to a GP, but we feel that you should view it as a totally new investment with a better information basis,” said Bär. “Sometimes the team is different, or people can change their attitudes over time. We’re investing in humans and organisations in the end, but it’s also about how long it takes for returns to settle, deals to mature and exits to happen.”

“You’re committing for another 10-12 years, and it typically takes a fund six to eight years to settle its final performance quartile,” Moritz added. “This is important in the discussion on persistency of returns as you typically underwrite a new fund when the current one is still relatively immature and only two to three years old. Generally speaking, returns often go down when deals get bigger as they are mostly sold through more competitive processes and companies tend to provide less room for value creation as they are more often already managed by more professional management teams.”

MPEP has previously invested in vehicles from private equity managers including Corpfin Capital, PAI Partners, ECI Partners, Marlin Equity Partners and Hg, according to Unquote Data.

People
Munich Private Equity Partners – Christopher Bär, Christian Moritz (managing directors).

[Editor's note: The sixth paragraph has been updated to clarify that MPEP III was the first program to raise a significant amount of external investment.]

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