Scottish Widows Investment Partnership's private equity division is eyeing opportunities to break into the secondary investment market as increasing numbers of investors in high quality funds need to make forced exits. Swip, the fund management arm of Lloyds TSB, has traditionally invested in funds at the initial fundraising stage.
However, it is now on alert for bargains as the credit crisis forces rival investors into financial distress or simply leaves them over-allocated to private equity. "We haven't set a timescale but we are certainly weighing up the opportunity; if the right opportunity were to come through in the next three months, there's no reason at all why we couldn't get involved in that," said Billy Gilmore, investment director of Swip's private equity fund of funds business.
"I think a logical next stage of our evolution would be to become involved selectively in secondary transactions," Gilmore told Reuters. Swip's focus over the last two or three years has been building its team and maximising its coverage of the European mid-market space.
Swip specialises in backing European mid-market buyout funds and manages 1.2 billion pounds ($1.87 billion) on behalf of its clients, typically investing around 300 million euros into 10 to 12 funds over the course of a typical year. Gilmore said any secondary investments would still be in the European mid-market buyout space. Fellow investment director Mirja Lehmler-Brown said secondary buyers were traditionally prepared to buy assets at a premium in order to get access to in-demand funds.
"We have got no access problems, we tend to get into the funds we want to invest in," she said. "But obviously pricing has completely changed and there will be investors out there that need to sell good funds at a discounted price and that's a completely different investment proposition." Swip is owned by British banking group Lloyds TSB Plc.