Private equity is a great business to be in, but of course most GPs get in the game as founders, as opposed to investors.
Roger Jenkins takes a different approach. As the head of principal investing and private equity at London-based Barclays Capital, he and his team have, on two occasions, treated alternative investment firms as they would any other attractive portfolio investment.
Barclays Capital, a division of Barclays Bank, has an interest in BlueBay Asset Management, a London-based fixed-income hedge fund with $7 billion in assets. Last month, Jenkins' group announced its inaugural investment in North America – a 40 percent stake in private equity firm NGP Energy Capital Management, an energy specialist formerly called Natural Gas Partners. Terms of the deal were not disclosed, although NGP has $2.9 billion in assets under management.
Most investments in private equity platforms by larger entities have been strategic in nature. Morgan Stanley and the Bank of Ireland, for example, have recently been active in snapping up funds of funds and hedge fund businesses.
But Barclays Capital sees NGP as a good financial investment, with an exit on the horizon. Indeed, Barclays plans to float BlueBay on the London Stock Exchange, raising approximately £500 million ($954 million; €747 million) and generating a likely profit for Barclays of roughly £60 million, according to reports. Jenkins declines to comment on the matter.
With NGP, Jenkins sees ?one of the most dynamic and interesting private equity investment areas over the next 10 to 15 years.?
In an interview, Jenkins stresses that Barclays Capital does not see NGP as its energy investment arm in the US. The investment is one of many in the Barclays Capital portfolio, and NGP will be exited down the road, likely in the form of an IPO.
Jenkins declines to discuss the economics of the NGP deal, but notes that the ?valuation of a private equity firm is really quite hard. At the most basic level you have a multiple of the management fees. But valuation involves both the management fee plus carry.?
?All the disciplines we've used historically were at play in our NGP investment,? continues Jenkins. ?We made sure management was good, we looked at the integrity of financial information, we made sure the sector was good.?
As private equity matures and its many founding partners look to monetize the businesses they've built, deal flow of the kind that interests Jenkins will most certainly increase.