Essling to shake up funds-of-funds formula with new vehicle

Speaking to unquote" at the time of Essling Capital's spin-out from Massena Partners and its rebrand in April this year, the new LP's president Michele Mezzarobba said the new outfit would look to make a number of hires to diversify its offering. It seems Essling wasted no time in scaling up its operations: in September, the firm recruited the funds-of-funds team of limited partner Amundi Private Equity, led by Jean-Yves Lagache.

The fund-of-funds team includes Nizar Chayeb as investment director, and senior investment managers Cédric Cabarrus and Sandra Saad. Having worked for 10 years at Amundi, the new team will manage investment vehicles and specialised mandates, mainly in private equity and private debt. Essling now counts 17 investment professionals managing €1bn. At the time of the spin-out from Massena, Essling aimed to double these assets under management within the next two years.

Mezzarobba says the firm did not seek to aggressively expand its fund-of-funds offering early on. "We didn't really set out to approach Jean-Yves and the team specifically, it was more of a fortunate set of circumstances that led us to this partnership," he says. "We got introduced by a GP in which they were invested and that we know well; we were thinking of developing our fund-of-funds offering among other potential projects; meanwhile, Jean-Yves and his team were tempted by a more entrepreneurial adventure. The match was a good one so we went for it."

New horizons
The team has now joined Essling and started work in earnest. The firm will launch its first fund-of-funds in the coming weeks, adding to its existing co-investment, real estate and private debt products. It is still refining the strategy so a specific target is not on the cards just yet, but Essling is aware of the need to stand out in a fund-of-funds landscape undergoing important changes.

"We won't necessarily be looking to reinvent the wheel, but we would like to offer something a bit different in that area," says Mezzarobba. "We are still working on that, but it is likely we would aim to offer something similar to what we are doing with our co-investment fund, which really struck a chord with investors." With its first co-investment fund raised last year, Essling chose to favour quick deployment in order to appeal to investors: the vehicle has a 12-month investment period and will not charge fees on uninvested capital during that time. Mezzarobba points out that the fund-of-funds will not necessarily follow the exact same model, but could offer something similar.

"Institutional investors – which we are keen to target as we have historically focused on a family office clientele – have a recurring need to invest," says Mezzarobba. "With that in mind, it would make sense to be able to engage with them more often than once every five years. The counterpart to that is that we must be able to offer greater flexibility in term of liquidity."

"We didn't really set out to approach [Amundi Private Equity's] Jean-Yves Lagache and the team specifically, it was more of a fortunate set of circumstances that led us to this partnership" – Michele Mezzarobba, Essling Capital

The upcoming vehicle will mainly focus on European and US buyout funds, with the option to make a small number of investments outside that geographical remit. It will also have a small pocket available for co-investments, in addition to the dedicated vehicle Essling already manages for that strategy, as well as secondaries. While this will be the team's core offering, Essling is not ruling out designing more bespoke options for investors, potentially down to single-investor funds down the line.

The next few weeks will be dedicated to laying the groundwork with regards to structuring the vehicle, ahead of a formal launch. Mezzarobba says Essling has not yet made a decision on whether or not it will hire a placement agent to help with the fundraise; it has been approached by a number of advisers, but could go it alone in the early stages as the former Amundi team already has a number of contacts in the investor community.

While this work is underway, Essling remains open to developing other parts of the business, although there are no definite plans as to what strategies will be tackled first. For the time being, the firm is active in the co-investment and buyout fund-of-funds space, with other avenues that could potentially be explored including private debt and direct majority investing.

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