Fund of funds consolidation ‘long overdue’

The private equity fund of funds sector is ripe for consolidation, say a number of senior professionals within the industry.

Hamish Mair, head of private equity at F&C Investments, described the industry as “crying out” for consolidation, in an interview for the March edition of Private Equity International.

“I have for a long time been of the view that consolidation is long overdue,” said Mair. “I was proved wrong for a couple of years as new managers continued to establish themselves and raise capital – often with little or no track record, raising money from just one source. But I expect more consolidation.”

Solomon Owayda, former chief investment officer for fund of funds manager SVG Advisers who this year joined Siguler Guff, said that “common sense” dictates that a shake-out of the industry will happen.

“You could count on one hand the number of funds of funds that were in business when I started in the late ‘80s. Now there are hundreds,” he said. “Common sense tells you that not all of them are going to survive.”

As yet, however, the number of mergers has been limited. One of last year’s standout deals saw Swiss group Capital Dynamics take over the assets of distressed Silicon Valley-based HRJ Ventures. This is unlikely to be the forerunner to other acquisitions, said Capital Dynamics managing director Katharina Lichtner: “We are not expecting it to be part of a wider phenomenon.”

PEI subscribers can read about consolidation in the fund of funds industry in greater depth here.