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Private Markets Quarterly Investor Letter

07 November 2019

The third quarter was a special quarter for the Private Markets Fund for three reasons:

  1. The barrier of EUR 100 million has been broken. A total of EUR 103 million of capital has now been committed by clients. Based on the pledged capital, we have been able to build up a widely diversified portfolio of which 75% has already been invested.
  2. We achieved a positive investment result of 3.7% in the third quarter; the fund is still under construction, but we are seeing a clear increase in revaluations and distributions that contribute positively to the result.
  3. The third quarter was also a particularly active period for the fund, with three new partnerships added to the portfolio. Our current partners were also fully active and concluded various transactions that we will further elaborate on in this report.


Portfolio activities and forecast

We have added two partnerships within Venture Capital: Balderton and Northzone. If we look at the number of unicorns (start-ups valued at over $ 1 billion) in portfolios of Early Stage Venture Capital investors (series A and B), Balderton and Northzone are among the absolute top in Europe. With this successful track record, strong reputation, network, size and experience, Balderton and Northzone are strengthening their position in the ecosystem and they attract the most talented entrepreneurs of the next generation of start-ups. It is therefore not surprising that both funds have been overwritten. By participating in both funds, we spread our capital to two complementary top players. Moreover, Balderton has traditionally focused more on the UK and Northzone has its roots in Scandinavia. Balderton was originally the European arm of the successful and renowned US Benchmark Capital. We participate in Balderton’s 7th fund generation, consisting of an experienced and broad group of partners. Balderton is known for,among other things, successful investments in Revolut, The Hut Group and GoCardless. Northzone is originally a Scandinavian Venture Capital investor that has grown to be a pan-European player with offices in Stockholm, London, Berlin and New York. We participate in their 9th fund generation. Examples of successful investments of previous funds are Spotify, Trustpilot and iZettle.

The Private Markets Fund has completed its first secondary transaction by acquiring an interest in the Folium Agriculture Fund I. A secondary transaction involves taking over an interest from a current investor. Folium Capital was set up in 2015 by partners who were previously responsible for Natural Resources investments at Harvard Management Company. We were able to acquire the position at a small discount on the NAV. The timing of the transaction is favourable as we enter at a time when a significant part of the development period is already behind us. The portfolio offers exposure to permanent crops in Chili (50%), Australia, Portugal, Spain and the US, with almonds and avocados as the dominant crops. With an investment in such permanent crops, it’s possible to respond to health trends that are responsible for strong growth in the demand for these crops. 

Finally, we further expanded our allocation to GSA Coral in Q3. GSA Coral is one of the global market leaders in the student housing real-estate niche segment. GSA is active in Europe and Asia and focuses on both more mature and growing markets for student-housing investments.

We closed the third quarter with a positive return of 3.7%. This brings the year-to-date return for the fund to 3.9%. Investments in Infrastructure, Land and Real Estate contributed positively to the return this year. The private-equity partnerships are still in an accrual phase: the costs are based on the benefits (the so-called ‘J-curve effect’) and the underlying portfolio companies are still kept at cost price in the first year. In addition, fluctuations in the exchange rates had a variable effect on the return over the past three quarters: on balance, the effect was slightly positive. In general, we see that the underlying investments are developing positively over the entire portfolio and we assume that this will result in a positive medium-term return development.

€ 123 million committed capital

Per 30 September 2019


Source: Kempen Capital Management, per 30 September 2019

Most important portfolio developments

Forbion (Forbion Capital Fund IV) completed one new investment in Achilles Therapeutics, a company that develops a cancer drug. The portfolio now consists of six investments.
Balderton (Balderton VII) completed the first two investments in its new fund: Gitguardian is a cyber-security start-up that assists in detecting data leaks and protecting software codes. Toucan Toco is a B2B-software start-up that offers data visualisation solutions.
Northzone (Northzone IX) completed the first three investments in its new fund. Spacemaker develops software for architects and project developers. Pollen is a platform that offers influencer word-of-mouth advertising. And Livepeer offers open-source video services.
Ciclad (Ciclad VI) invested in FrogPubs: a French chain of English pubs that brews its own quality beer. Ciclad has now completed ten investments and 50% of the committed capital has already been called up and invested.
Steadfast (Steadfast Capital Fund IV) completed two investments we already announced in the previous quarter. This concerns Koop Wasserbau, a Dutch/German company active in groundwater technology, and BUK, a production company specialised in plastic precision parts. Steadfast has now completed five investments.
WestBridge (WestBridge SME Fund II) has completed no new investments in the third quarter. We do see a well-filled pipeline and good traction at the three portfolio companies WestBridge invested in. 
AJM Healthcare (Direct Co-investment) won additional long-term contracts that will contribute positively to sales and profit growth. We have also appointed an independent chairman at AJM together with our British investment partner. 
J.P. Morgan (J.P. Morgan Infrastructure Investments Fund) has further expanded positions in Ventient Energy and Koole Terminals. On the other hand, J.P. Morgan is trying to reduce positions in regulated infrastructure in the UK, part of the interest in Electricity North West has already been sold.
AMP (AMP Global Infrastructure Fund II) has completed an investment in a cloud storage company in the US, Expedient. In addition, the underlying portfolio of companies performed very well, which has already led to a very positive return.
Project Bäckhammar (direct co-investment) is going according to plan, the (ground) works are in full swing. 
Craigmore (Craigmore Permanent Crop Partnership) added four small kiwi orchards to the portfolio and was also busy with the development of apple and kiwi orchards. 
RMS (RMS Evergreen US Forestland Fund) performed operationally above budget, but saw the assessed values remain virtually unchanged this period.
Clarion Gables (Clarion Gables Multifamily Trust) recorded stable distributions and capital revaluations for the past quarter.
GSA (GSA Coral) is working on the delivery of six new student complexes in respectively Dublin, Barcelona and Bournemouth. The goal of GSA is to let as many of beds for the new semester. 

Download our Letter

2019, 07 November

Private Markets - Quarterly Investor Letter Q3



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


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