Private Markets Quarterly Investor Letter
Portfolio activities and forecast
We have added two new Partnerships to the portfolio. First, we invested in the RMS Evergreen US Forestland Fund. This fund focuses on sustainable forestry in the southeast of the United States, the largest commercial forestry region worldwide. RMS is fully focused on investing in and managing forests, and has an extensive experience in this market. The level of timber prices is still relatively low historically and we expect a positive growth in demand for timber in this region, in particular due to the arrival of a large number of new, modern sawmills.
The second new Partnership that we have included is GSA Coral. GSA is one of the global market leaders in the real estate niche segment of student housing. GSA is active in Europe and Asia and focuses on growing markets as well as more mature markets for student-housing investments.
In thefirst quarter we also further expanded our existing commitments to two existing Partnerships: AMP Capital Global Infrastructure Fund II and WestBridge Capital SME Fund II. We expect to make additional commitments to a number of existing Partnerships in the next quarter.
The return for the first quarter amounted to 1.1%, mainly due to investments in Infrastructure (J.P. Morgan and AMP), Agriculture (Craigmore) and Real Estate (Clarion Gables). These funds reported a positive income and/or a positive revaluation of the net asset value of the underlying assets in their portfolios. The currency positions are not hedged in the fund and have had a positive effect in this quarter. For most Private Equity Partnerships, it’s still too early for upgrades as underlying portfolio companies are generally held at cost in the first year.
In the overview below, we show the portfolio at the end of March 2019 on the basis of the committed capital. With 10 Partnerships and 2 co-investments, we have now built up a well-diversified portfolio. We will probably increase the allocation to Land and Real Estate a little more in the coming quarter. In addition, we also look at various new investment opportunities within Private Equity.
€ 83 million committed capital
Per 31 March 2019
Source: Kempen Capital Management, per 31 March 2019
important portfolio developments
Forbion (Forbion Capital Fund IV) made one new investment in the past quarter, which means that it invests in four companies now. The new investment, Dyne Therapeutics, is developing drugs for rare muscle diseases.
Ciclad (Ciclad VI) has made a number of add-on acquisitions for their current investments. The portfolio company Tofane, for example, took over iBasis from KPN with which it further expands its global proposition for communication solutions. Ciclad has now completed seven investments and for the coming quarter two new investments are planned with which around 45% of the capital will be called up.
Steadfast (Steadfast Capital Fund IV) has not completed any new investments in the first quarter. It is currently working on various investment opportunities for which it has obtained exclusivity. Two investments are expected to be completed in the coming quarter.
Westbridge (WestBridge SME Fund II) has completed two new investments: APEM Ltd, an independent environmental consultancy firm, and Wilcomatic Wash Systems, market leader in the design and manufacturing of machines for car washes.
AJM Healthcare (Direct Co-Investment) won three new long-term contracts that positively contribute to sales and profit growth.
J.P. Morgan (J.P. Morgan Global Infrastructure Investment Fund) at the end of the first quarter called up the capital of our top-up commitment issued in September 2018. The Private Markets Fund is therefore fully invested as from the following quarter.
AMP (AMP Global Infrastructure Fund II) completed an important acquisition by taking over a competitor from the portfolio company Regard Group.
Project Bäckhammar (Direct Co-Investment) concluded a long-term energy purchase contract with Amazon Web Services for a period of 10 years. Amazon’s long-term goal is to generate 100% sustainable energy for its data centres.
Craigmore (Craigmore Permanent Crop Partnership) announced two new investments: both a development of an apple orchard and an acquisition of a kiwi orchard. Craigmore has closed its fundraising since.
RMS (RMS Evergreen US Forestland Fund) was added to the Private Markets Fund at the end of the first quarter. The underlying portfolio is positioned in the southeast of the US.
Clarion Gables (Clarion Gables Multifamily Trust) was quite active in the last two quarters with the sales of four apartment complexes, the buyout of a JV partner and the realisation of an apartment complex in Dallas.
GSA (GSA Coral) was added to the Private Markets Fund at the end of the first quarter. GSA announced new development projects in both Japan (Tokyo) and Spain (Valencia). Various existing development projects for the coming academic year in the United Kingdom, Spain, Ireland and Australia will be completed and rented out to students.
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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.
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