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LP Profile: Flexstone

Eric Deram from Flexstone Partners
Flexstone managing partner Eric Deram
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  • $500m invested each year in primary, secondaries and co-investments
  • Dedicated funds for co-investment and secondaries
  • Set of generalist funds-of-funds

Natixis Investment Managers’ recently consolidated and rebranded private equity arm, Flexstone Partners, revealed it has plans to launch a global fund initiative dedicated to co-investment. Managing partner Eric Deram talks to Denise Ko Genovese

Flexstone Partners was officially formed in December 2018, when Natixis Investment Managers combined its existing private equity affiliates into one entity. It is a combination of four sister companies; its Swiss affiliate was formed in 2005, its French and Singaporean affiliates were founded in 2007, and the US affiliate was founded in 2008.

Managing partner Eric Deram recently told Unquote that there are now plans to launch a global co-investment and secondaries vehicle. This would be a change to the firm’s current strategy, which separates funds and track-records in the Americas, Europe and Asia.

The investment manager combines its role as a services company – managing and advising clients – with raising money for commingled funds with dedicated strategies.

“We design customised solutions for our clients that combine exposure to the global private equity markets, with a focus on small-cap and mid-market buyout funds, along with access to co-investment and secondary opportunities,” says Deram.

As well as the dedicated funds for co-investment and secondaries in the different geographies, Flexstone also has a set of generalist funds-of-funds.

In Europe, Select Opportunities I closed on €127m in 2014. This is fully deployed with net IRR of 27% and distributions-to-be-paid-in (DPI) of 1x already returned to investors, as of the end of 2018. Its successor, Select Opportunities II, which launched in 2017, was marketable only in certain European countries and has a hard cap of €300m. As of the end of February 2019, it had raised €255m and is already 33% deployed in eight co-investments and secondaries.

We design customised solutions for our clients that combine exposure to the global private equity markets, with a focus on small and mid-market buyout funds” - Eric Deram, Flexstone Partners

There is also a French fund-of-funds programme, the latest vehicle being France Sélection III. The fund was launched in 2016, is €100m in size and was more than 75% deployed by the end of January 2019. Its cornerstone investors include the European Investment Fund, BPI France, and French insurance companies and mutuelles.

In the US, Private Equity US Opportunity I closed on $200m in 2011. This is fully deployed and mainly realised with net IRR of 23% and a net return on investment (ROI) of 2.1x. It had returned a 1.9x DPI to its investors by the end of 2018. Its successor, Private Equity US Opportunity II, closed on $242m in 2014 and is fully deployed with net IRR of 17%, net ROI of 1.6x and 1x DPI returned to investors by the end of 2018.

On the deployment front, Flexstone commits to small- and mid-cap GPs with fund sizes of €100m-1bn, though it has made commitments to some vehicles that are larger than €1bn. Primary tickets are typically €5-50m, though for a venture capital or growth capital fund it is closer to €5m.

In terms of LP base, 95% of its own investors are institutions - mainly Swiss, French, Asian, Australian and US; and pension funds, insurance companies, banks, sovereign funds and endowments. Around 5% are high-net-worth-individuals and family offices.

Background in services
Despite the increasing amount of money going into its funds, Flexstone’s roots are as a service provider. Indeed, of the near €7bn in assets under management, 75% is accounted for by managed accounts. It manages more than 25 dedicated portfolios ranging from €25-500m.

Overall, $500m is invested each year in primary, secondary and co-investment deals, and the firm currently has money with more than 300 funds via primary and secondary commitments.

The firm has a global team of more than 40 people, with offices in Paris, New York, Singapore and Geneva. The launch of Flexstone follows other Natixis ventures into alternatives and real assets last year. It recently acquired MV Credit, a UK-based private debt specialist; and launched a real asset private debt co-investment platform through its affiliate Ostrum Asset Management and Natixis’s Corporate and Investment Banking arm.

Key team members

  • Eric Deram is a managing partner based in Geneva, where he leads overall strategic development. He founded Euro Private Equity in 2005, prior to which he was a director at DB Capital Venture Partners, the European Venture Capital arm of Deutsche Bank, and an investment executive at CSFB Private Equity.

  • David Arcauz is a managing partner based in Geneva, where he leads European investments. He was previously at Euro Private Equity and spent six years as a partner at Adams Street Partners and five years on the private equity team at UBS Global Wealth Management.

  • Nitin Gupta is a managing partner in New York, and leads US investments. Gupta was previously at Caspian Private Equity, prior to which he was a principal at Westbury Partners and a senior associate at Saunders Karp & Megrue.

  • Benoit Jacquin is a managing partner based in New York. He is responsible for managing investor relations and fundraising activities. Jacquin was a founding partner of Caspian Private Equity.

  • Benoit de Kerleau is a managing partner in Paris and serves on the European audit committee, and the global and European investment committees. Before joining Euro Private Equity, he was managing partner at Natixis’s European funds-of-funds and advisory arm Dahlia Partners.

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