Core Equity launches €1bn long-term fund

Founded in 2015 by four ex-Bain Capital senior members – Walid Sarkis, Thomas de Waen, Alain Stoessel and Marc Valentiny – Core Equity claims it will attempt to disrupt the traditional investment strategies favoured by private equity funds.
 
"Loads of evidence has shown that funds are forced to realise their investment all but too early on, and that as a result investors and management teams have lost out on company growth," a source familiar with the firm's operations told unquote". 

On this premise, Core Equity's strategy allows for an investment period lasting anywhere up to 15 years, which it believes will open up possibilities for better returns and growth. 

Core Equity's choice of longer holding periods follows a burgeoning trend in the private equity industry, first covered by unquote" two years ago. Nordic GP Altor closed a 15-year vehicle in 2014 and 2015 saw Luxembourg GP Castik Capital close its European Private Investment Club I (Epic I) on €1bn, pledging to stay invested in its portfolio companies for up to 10 years. Golden Gate Capital and Invus in the US have launched similar strategies.

"Investments are typically very much constrained by the fund's lifespan," the same sourced added. "The team realised that this model quite often meant that, when you've made a profitable investment in a business, great returns start flowing in after three or four years only; so extending the holding period meant that substantial benefits could be gained, both in terms of IRR and for the management team."

The alternative approach meant the GPs were able to set up "premium" carried interest, closer to 30% in Core's case, rather than the traditional 20%, the source said.  

Special features
According to the source, the number of LPs invested in the fund is "a lot smaller than in usual PE funds".

Core Equity's backers are typically blue chip investors, with a longer-term outlook aligned with the GP's investment scheme, including endowments and pension funds.

The firm is launching with a €1bn debut fund, which was recently closed for subscriptions, but will be "topped up" over time, the source said.

"Once the first investment is made, the team will be able to go back to investors and top up to the €1bn mark, so that the fund always has firepower of roughly a billion euros," said the source. The fundraise was reportedly completed without a placement agent. 

In terms of investments, the fund is targeting large-cap deals only, looking to invest between €200-500m. The source could not give a precise turnover range for targeted businesses. 

Core Equity's first fund will take mostly majority stakes, in European companies in the industrial, consumer, retail and business services sectors. Initially it will look to make between three and five investments. No investment has been made yet, but the team is "actively looking", the source said.

While the fund's legal base is in the Cayman Islands, the team will be based in Brussels. 

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