To news & knowledge overview

Private Markets Quarterly Investor Letter

Examples include the focus on relatively less competitive market segments (such as life sciences venture capital and small buyouts within Private Equity) and on emerging institutional investment markets (such as agricultural land in New Zealand). In our investment process, we also look in particular at investments that offer a good answer to the broader global long-term challenges such as developments as aging, increasing health care costs, energy transition, climate and food scarcity. At the time of writing, we have completed the first 7 investments spread across all four categories; Private Equity, Infrastructure, Land and Real Estate. We will expand the portfolio further in the coming quarters. We thank you for your trust and hope that you will enjoy reading this quarterly update.

Portfolio activity

The Kempen Private Markets Fund was launched on 2 May and so, it has not yet completed a full quarter. Nevertheless, over the months in preparation of the launch, we have worked hard performing in-depth due diligence on various private markets General Partners (GPs). Up until mid-July, we were able to commit 94% of client committed capital to high-quality specialists.

Most of the capital commitments we made for the Fund were confirmed by GPs mid-July. We are therefore writing this update looking at a portfolio snapshot per mid-July instead of end of June, so as to be able to provide a bit more colour on actual investments. We note, however, that as the commitments were made until mid-July, we are unable to report a performance figure for the first period, as it is simply too early. As we all know, private markets investments are long-term, illiquid assets and it typically takes several years for the committed capital to be drawn and to be put to work in diversified private portfolios and to start generating returns. However, as we invest in a mix of closed-end and open-end funds, we have been able to put to work nearly half of the capital already, which should start to generate returns in the next few quarters. When we are further underway and the portfolio is up and running, we will be able to start reporting meaningful performance figures. This report employs data obtained from the underlying GPs.

Within Private Equity, we successfully committed to four GPs. Three of the private equity GPs are focused on the small-cap to lower-mid-market buyout market, where we prefer regional specialists. We have selected a France-focused buyout partner (Ciclad), a UK specialist (WestBridge) and a DACH (Germany, Austria and Switzerland) focused firm (Steadfast). The fourth private equity GP we added to the portfolio is Forbion, a venture capital specialist focused on life sciences. More details on each specialist will follow in the next few paragraphs. We note that all selected GPs are finalizing the fund raising process, so they will now focus on investing the committed capital in new deals. Interestingly, Ciclad already put to work 20% of the committed capital into the first two investments and they are finalizing two more investments at the time of writing. WestBridge, Forbion and Steadfast both are also negotiating their first deals, so we expect the first capital to be drawn and put to work by these partners in the coming two quarters as well.

Within Infrastructure, during the quarter, we invested in the J.P. Morgan Infrastructure Investments Fund, which is a non-listed global core plus oriented infrastructure GP. What is unique is the fact that the J.P. Morgan fund is an open-end fund and as such has an existing globally diversified portfolio of attractive infrastructure assets that generate yield immediately. Our capital was drawn and put to work fully by mid-July.

Within Land, we invested in the Craigmore Permanent Crop Limited Partnership, which focuses on the attractive New Zealand agricultural permanent crops market. Our capital was drawn and put to work by mid-July already whereby the capital will primarily be invested in three crops: kiwis, apples and wine grapes. More details can be found below.

Last but not least, within Real Estate, we subscribed to the Clarion Gables Multifamily Trust, an open-end fund with a mature portfolio of private multifamily apartment blocks, in high-quality area codes, mostly in the faster growing southern states. With these first six high-quality investments, we believe the Kempen Private Markets Fund is well-positioned to profit from future opportunities in the various private markets categories we cover.

Looking ahead 

We are looking to further broaden the Private Equity portfolio. Specifically, we are looking into the Nordics and the UK at the moment. We also see good deal flow of direct co-investments and we are working on a direct co-investment in the UK health services sector which is scheduled to be signed in the third quarter.  Further ahead we are looking at several venture capital technology specialists.

Within Infrastructure, we aim to add a complementary value-add specialist next to the J.P. Morgan Infrastructure Investment Fund, which pursues a core plus investment strategy. We still see interesting opportunities in exciting themes such as stabilization of the (renewable) energy grid, the rollout of fibre and the development of data centres within the communications sector, and new transport and logistics solutions for a growing economy. Value-add specialists take a more forward-looking (infrastructure of the future) approach than core GPs and may benefit more from the ongoing transition. In parallel, we are working on a direct co-investment in a greenfield wind park in Sweden, which is scheduled to be signed in the third quarter as well.

Turning to Land, we are aiming to add a global fund focused on both farmland and timberland going forward. This will further increase our geographic and crop diversification within this asset class.  Hereby we look for a specialist with strong regional presence to be able to step into interesting investment opportunities across the globe effectively.

Within Real Estate, we are evaluating interesting opportunities within European niche classes such as student housing. Within two decades, purpose-built student accommodation (PBSA) penetrated the UK market by growing from low levels to a market share of nearly 35%. With the current trend of rising global student mobility, European and Asian universities have ramped up their offerings to international students with full English Bachelor’s and Master’s degree programs. A growing international student community will result in a growing demand for PBSA that is better tailored to facilitate easy bookings, secure environment and proximity to the respective universities.

Download our Letter

2018, 13 August

Private Markets - Quarterly Investor Letter

Download

Disclaimer

Kempen Capital Management N.V. (KCM) is the management company of the Fund. KCM is authorized as a management company and regulated by the Dutch regulator Autoriteit Financiële Markten. The Sub-Fund is registered under the licence of KCM at the Autoriteit Financiële Markten and not subject to Luxembourg supervision. The shares of the Sub-Fund are admitted for (public) offering in the Netherlands, the UK, France and Switzerland. The information in this document provides insufficient information for an investment decision. Please read the Key Investor Document (only for the Netherlands) and the prospectus. These documents of the Fund are available on the website of Kempen.

The Sub-Fund may have investments in financial instruments mentioned in this document and it may at any time decide to execute buy or sell transactions in these financial instruments. The views expressed in this document may be subject to change at any given time, without prior notice. The information in this document not intended and should not be considered as research, an investment recommendation or as an offer and provides insufficient information for an investment decision.

Although the contents of this document have been compiled with the utmost care, and are based on reliable sources of information, no guarantee or warranty is given and no liability is accepted, express or implied, regarding the completeness or accuracy of the contents.

 

Our team

Subscribe

Please leave your email and we will send you our latest updates