Escape from captivity

Working for a captive fund must be like being a civil servant. You've got all the cash and manpower you need, but when it comes to making the important decisions, someone else is boss. Of course, one concession made by parent companies does tend to make this grim reality slightly easier to stomach: as compensation for the fund managers' reduced independence, they usually assume most or all of the responsibility for finding the capital required for investments. For some, however, this benefit is not enough and the temptation to break away from the parent and start up on their own becomes simply too much to bear.

Countdown to spin-out
Such was the case for several executives of Ibersuizas - the most active private equity investor in Spain during the past five years. Tensions came to a head between partners Ramón Cerdeiras, Fernando Chinchurreta, Juan Luis Ramirez Belaustegui and Iñigo Sánchez-Asiaín and the firm last autumn, when the four were dismissed for "failing to comply with their most basic duties" - or in the words of Cerdeiras, "because we wanted the autonomy to manage the funds in our own way". Though it only owned stakes of 10% and 7% respectively in Ibersuizas Capital Funds I and II, the parent company came to blows with all but one member of its fund management team - Jorge Delclaux - over the independence they would be allowed to advise the firm's planned third vehicle.

Sacking your key men, though, is risky business, as Ibersuizas is now all too aware. No sooner were Cerdeiras, Chinchurreta, Ramirez and Sánchez-Asiaín ousted, than the key man clause on their two funds was triggered and the LPs (who include Goldman Sachs and the European Investment Fund) were hauled over to Spain to decide where their loyalties lay. While a bitter legal battle raged between the four and their former parent, the funds' investors opted for the vehicles (which hold all the brightest jewels in Ibersuizas' crown) to be transferred back into the hands of the team they had supported all along. For Cerdeiras, the decision was unsurprising: "While it could have gone either way, we were confident that they would choose to come with us. Parent companies shouldn't interfere in investment and divestment choices; LPs want to back independent funds which are free to make their own decisions." Around the same time, the law suits were dropped and an out-of-court settlement is said to have been agreed.

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