New Star Asset Management is pleased to announce that it is entering the private equity market through the creation of a fund of funds vehicle to be named New Star Private Equity Investment Trust PLC ("NSPEIT").
NSPEIT will have an investment policy to invest in a diversified portfolio of private equity funds, predominantly exposed to mid-market buyout funds in the UK and Europe. NSPEIT will be formed from the proposed merger of August Equity Trust plc ("August") and Rutland Trust PLC ("Rutland") and the appointment of New Star as the ongoing investment manager. NSPEIT's initial portfolio will comprise existing investments from both these funds as well as investments in listed private equity vehicles. In addition, NSPEIT will have commitments to existing, and seek to make commitments to new, private equity limited partnerships ("LPs").
NSPEIT will be managed by an experienced team at New Star led by Paul Craig who has invested in a listed private equity vehicles since 2003 and generated a compound annual return from such investments of 21.7 per cent. from 1 September 2003 to 28 February 20071. An advisory committee will provide support to New Star through sourcing and assessing proposed investments in private equity limited partnerships. The advisory committee will be chaired by Michael Langdon, Chairman of Rutland Partners LLP.
Ravi Anand, a Director at New Star Asset Management, said
"Private equity provides an alternative source of equity returns for investors and is an important part of any diversified portfolio. We are pleased to have to been selected to manage this new vehicle, which as a fund of private equity funds provides investors with immediate exposure to private equity returns. Including property and hedge funds, New Star's offering to alternative assets will span three major alternative asset classes' areas. Interest in alternative assets continues to increase. This has been recognised by APCIMS who are changing their benchmarks to include alternatives".
Paul Craig, the proposed lead fund manager of NSPEIT, said:
"We believe that private equity will continue to provide attractive returns relative to quoted markets as investors increasingly come to understand the dynamics that have driven the performance of this asset class. Exposure to private equity as an asset class in Continental Europe remains significantly below that of the UK and US and we expect this gap to narrow over time. The combination of adding listed private equity and commitments to other private equity limited partnerships to take advantage of this will add to the excellent performance of both Rutland and August and should provide attractive returns to shareholders".
The merger
The merger of August and Rutland, announced today, followed strategic reviews by both companies, including a review of other third party proposals. The merger seeks to create a diversified fund of private equity funds vehicle benefiting from the combined management expertise of New Star, August Equity Limited and Rutland Partners LLP. It is expected that such a vehicle should be attractive to a wide audience of potential investors who wish to access private equity returns and thereby, combined with the marketing support of New Star, enhance the rating of the shares in the market.
The merger will also give shareholders of both companies the opportunity to realise a significant portion of their holdings for cash at a price which is close to their respective prevailing net asset values per share.
The Boards of each Company will publish documents containing detailed information on the proposals as soon as practicable following regulatory approval of the documentation. It is expected that the proposals will become effective at the end of June 2007. The Boards have received letters of intent from shareholders representing 64% of August's share capital and 54% of Rutland's share capital to support the proposals.
NSPEIT
NSPEIT will have an investment policy to invest in a diversified portfolio of private equity funds, predominantly exposed to mid-market buyout funds in the UK and Europe. NSPEIT will also invest in listed private equity vehicles. It is expected the portfolio will be fully invested shortly after implementation of the proposals thereby minimising the effects of any cash drag typically associated with private equity investment.
As part of the proposals, New Star will seek to attract money for new investors to NSPEIT and will be undertaking a placing of shares. It is expected that NSPEIT will have an initial size of at least £90 million.
Immediately following the merger, prior to any further investments or commitments to private equity vehicles its expected that NSPEIT's unlisted portfolio will comprise the investments listed below and will be diversified by sector, vintage year and geography:
(estimated value+) £m
August Equity managed funds 29
The Rutland Fund 24
Other limited partnerships 13
Total 66
In addition it is expected that NSPEIT will have commitments totalling £73 million, comprising remaining commitments in existing funds of £33 million and new commitments of £30 million to August Equity Partners II and £10 million to Rutland Fund II. NSPEIT expects to arrange borrowing facilities to allow for an over-commitment policy. In addition, investments in listed private equity vehicles may be realised to meet commitments to limited partnerships.
Enquiries
Ravi Anand, New Star Asset Management - 020 7225 9292
Denise Lyttle, Polhill Communications - 020 7655 0550
This announcement does not constitute, or form any part of, any offer for, or solicitation of any offer for, securities. Any acceptance or other response to the proposals should be made on the basis of the information contained in the formal documentation to be dispatched to shareholders of August and Rutland in due course.
Notes for Editors
1. New Star Asset Management is an asset management group, listed on the London Stock Exchange's Alternative Investment Market with £21.1 billion of assets under management (at 29 December 2006), including approximately £1.2 billion in alternative assets.
2. NSPEIT will pay New Star a basic management fee of 1.25 per cent per annum of the assets invested in limited partnerships and direct private equity interests and 0.75 per cent per annum on all other assets. New Star will also be entitled to a performance fee of 10 per cent of any return in excess of 8 per cent per annum.
+based on estimated valuation as at close of business on 21 March 2007
1Total returns from 1 September 2003 (when management of the fund was moved to New Star) to 28 February 2007 based on the individual price returns, from listed private equity funds in New Star UK Strategic Capital Unit Trust (the "fund"). Returns are based on daily total returns, including dividends where available, and have been translated into sterling before aggregation. No adjustment has been made for cash held in the fund. No fees have been deducted or tax been charged. These returns are not compliant with Global Investment Performance Standards and are for illustrative purposes only. Total returns and closing mid market prices have been sourced from Datastream. Past performance is not necessarily a guide to future performance. The value of investments and any income from them may fall as well as rise and investors may not get back the amount originally invested