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European PE's potential for alpha overshadowed by views on GDP growth


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European PE's potential for alpha overshadowed by views on GDP growth

Europe is "misunderstood from an ability to drive alpha" perspective, a private markets-focused senior investment director at Cambridge Associates LLC argued, and the European landscape has a plethora of smaller, underappreciated investment opportunities.

Investors are comfortable with the U.S. private equity market, and Asia is still seen as a growth story. But Josh Featherby, who advises institutional investors in Europe and the Middle East on their global investment portfolios, said there is an overriding sense in Europe that "you've got to overcome a sluggish GDP," which is "an initial hurdle for a lot of people to get over, compared to an Asia story where the growth is just much clearer."

European PE firms have branched out from being country or pan-Europe specialists into more sector specialization, following U.S. peers who have been successful in areas including technology, healthcare and consumer, Featherby said. "I think the tech ecosystem, the biotech ecosystem in Europe is really compelling at much cheaper valuations than what we're seeing in the U.S., but with arguably similar talent and similar science."

The number of managers often senior investment professionals spinning out from firms to start their own operation in Europe is also a factor that can potentially drive high returns.

Emerging funds are more likely to outperform because "they tend to be hungrier, they tend to not have multiple other strategies they're also earning fees and carry off, they tend to be going back to a smaller end of the market where there is the opportunity for outperformance," Featherby said.

Read more from Featherby's interview and check out some of Cambridge Associates' data on the returns from PE and venture capital in Europe and globally here.


* Clayton Dubilier & Rice LLC's unsolicited cash takeover offer valuing Wm Morrison Supermarkets PLC at about £5.5 billion was turned down by the British supermarket chain, arguing that the bid "significantly undervalued" the company and its future prospects. The buyout firm has until July 17 to make a binding offer for the company, which does business as Morrisons.

* KKR & Co. Inc. will purchase a majority interest in Vini Cosmetics Pvt. Ltd. from Sequoia Capital India Advisors Pvt. Ltd. and Vini's founder group for about $625 million. The private equity firm also agreed to buy a majority stake in Education Perfect Ltd., an education technology company operating in Australia and New Zealand.

* The Carlyle Group Inc. and Bain Capital LP submitted preliminary bids to purchase a 69.99% stake in South Korean auto parts company Hanon Systems Corp. from Hahn & Co. and Hankook Tire & Technology Co. Ltd., The Korea Economic Daily reported, citing sources in the investment banking industry.

* CVC Capital Partners Ltd. will purchase a majority stake in ExamWorks LLC from Leonard Green & Partners LP and GIC Pte. Ltd., which will continue to own significant equity interests in the healthcare service company.

CVC was also among the bidders shortlisted by Hillebrand to advance to the second round of bidding for the German liquor logistics company, which could sell for as much as €1.5 billion, Reuters reported, citing people close to the matter. The firm also agreed to sell leather-maker Conceria Pasubio SpA to peer PAI Partners.


* SK Capital Partners will divest food preservation business Niacet Corp. to taste and nutrition company Kerry Group PLC for close to $1.02 billion on a cash-free, debt-free basis.

* GI Manager LP, or GI Partners, held the final close for GI Partners Fund VI LP, with $3.9 billion in capital commitments.

* 51job Inc. will combine with Garnet Faith Ltd. and be acquired by an investor group including DCP Investments in a deal worth $5.7 billion.

* The final cash offer made by a Lone Star Global Acquisitions Ltd. affiliate to buy Senior PLC at 200 pence per share was rejected by the British engineering solutions provider.


* British grocery startup Dija Ltd., which is backed by Blossom Capital Ltd., Creandum AB and Index Ventures, is exploring a sale or a merger with a peer as part of its strategic review, Bloomberg News reported, citing people familiar with the matter.

* JAB Holding Co. Sàrl-backed Krispy Kreme Inc. expects its IPO of 26,666,667 common shares to price at a range of $21.00 to $24.00 per share.

* Bridgepoint Advisers Ltd. reached a deal to take a minority stake in fast-food chain Itsu Ltd.