Since being appointed 3i's new CEO justover a year ago, former Investcorp managing director Philip Yea has wasted no time in stamping his imprint on the London-listed global investor. By refining its investment strategy, opening new offices and hiring fresh management talent, Yea has forced people to re-evaluate the 3i brand. But one easily overlooked aspectof this transformation is the firm's emergence as a limited partner.
3i has made three strategic investments in private equity funds from its balance sheetover the last year, committing €179 million ($216 million) in total. To put this in perspective,3i has justover €3 billion in assets under management and invested a total of €1.6 billion in buyouts, development capital deals, corporate restructurings and venture capital transactions in the year to the end of March 2005. This makes limited partner investments a relatively small but still significant part of 3i's overall activities.
In an interview, 3i head of group markets Chris Rowlands said there were particular circumstances surrounding each of the allocations to date. In the second half of 2004, it punted €42 million as part of a ¥50 billion (€389 million) fundraising by Japanese mid-market buyout firm MKS Partners. This was to give 3i, in Rowland's words, a ?window into the Japanese market,? which it had lacked since closing its own Japanese operation in 2003 in the face of disappointing deal flow.
Its third LP commitment came when 3i accounted for the entire €100 million raised by Central and Eastern Europe investor 3TS Capital Partners for its second fund in May. In this case, Rowlands says the allocation was a vote of faith in a firm that has been jointly owned by 3i along with Finnish research and development agency SITRA since 2000. Rowlands says 3i has been impressed with 3TS' performance over the years.
3i has been an opportunistic LP to date, so further fund commitments should not be expected on a regular basis. But, given Yea's apparent willingness to challenge established notions, nothing should be taken for granted when it comes to making forecasts about the intentions of this giant of private equity.