Successful launch of private equity fund of funds in difficult market environment

In June, Erste Asset Management announced the first closing of its private equity fund of funds, “Erste Diversified Private Equity I” at EUR 80mn. In an interview, Thomas Bobek, Head of Private Equity Management, is very satisfied with the successful start of the fund.

Higher interest rates have caused turmoil on the markets this year. To what extent does the more difficult environment affect the private capital markets?

The changes in the interest rate landscape have also led to lower valuations on the private capital markets. In this respect, more turbulent times, the likes of which we are seeing at the moment, are not a bad time to launch a private equity fund. Entering now, at lower valuations, offers the opportunity for higher returns over the long term. We see that demand for private equity investments remains high despite the challenging situation on the markets. This is illustrated not least by our successful fundraising and the first closing of the fund of funds in Q2.

Talking about first closing: What are the next steps in the fund and what is your conclusion so far?

The second investment round of Erste Diversified Private Equity I is currently underway. Interested investors who want to participate in the positive development of the fund can still come on board until the final closing. The existing investors are very happy with the start and are currently considering increasing their investment. The portfolio has performed strongly so far. The uplift in TVPI (total value to paid in) is delivering a positive performance for our investors.

The investment focus of Erste Diversified Private Equity I is on the Central and Eastern European region. What sort of potential do you see there?

There is a lot of know-how in various technology areas across Central and Eastern Europe. We are very convinced of the region, but private capital has not quite arrived there yet. Investors need to catch up. The exposure of insurance companies, pension funds, or even asset managers remains limited, while in the USA and in Western Europe institutional investors are very active in this asset class. Here we offer attractive solutions for entry-level investments. Our offer is aimed at institutional investors and qualified private investors.

In addition to the regional focus on Central Europe, our investments focus on venture capital and private equity funds that invest in high-growth small and medium-sized enterprises. These are, in particular, venture capital, growth equity, and buyout investments. For investors, this not only offers the chance of higher returns in the long term. A private equity investment, for example in our fund of funds, also brings real diversification to the portfolio.

How do you see the future in the private equity sector, and what are the next steps for your fund of funds?

Private equity has been one of the most successful asset classes in recent years. It is now well established and has developed into an important component of the strategic asset allocation of long-term investors. We notice that the demand for private capital investments is also on the rise in the private banking sector. In the USA, the share of companies financed by private equity is now about twice as high as that of listed companies, and this trend is also emerging in Europe. The asset class will therefore continue to play an important role in the future in general, but also for us at Erste AM. With our private capital offer, we address the great need for equity capital, we support founders and companies and thus promote growth, innovation, and the private capital market in our region. 

About the fund
The private equity fund of funds “Erste Diversified Private Equity I” was launched in June 2022 with a first closing at EUR 80mn. The investment focus is on Central Europe and the DACH region (i.e. the German-speaking region of Germany, Austria, and Switzerland). We diversify across the venture capital, growth equity and buy-out phases of funds investing in seed capital, start-ups, high-growth small and medium-sized enterprises, and established, successful companies. In addition to Erste Group, the anchor investor, the first investors include pension funds and insurance companies from Austria and abroad. Institutional investors and qualified retail investors can still participate until the final closing. The target volume is up to EUR 150mn.

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Legal note:

Prognoses are no reliable indicator for future performance.

 

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