The continued pressures of Solvency II on the alternative assets industry is evident, as French insurance company Groupama announced the sale of its private equity operations to ACG Group this week. The capital adequacy regime for European insurance companies is forcing firms to decrease their allocations to private equity, restricting the levels of capital that insurers can invest in order to mitigate the risk of insolvency. As European insurance companies are typically quite prominent investors in the alternative asset classes, the restrictions will have a significant impact on their allocations and the wider investment landscape in general.
Groupama Private Equity, a subsidiary of Groupama, is dedicated to managing unlisted assets for third party accounts and will be sold to ACG Group, subject to customary regulatory approval. This is expected to be obtained by the end of Q1 2013. The transaction is part of Groupama’s divesture of its non-core assets, and with this acquisition, ACG Private Equity will take control of Quartilium, the fund of funds team of Groupama Private Equity, which has €1.4bn of assets under management. The firms’ merger will create a new independent private equity team, both on a French and on a wider European scale. The combined operations under ACG Private Equity will engage in primary and secondary funds of funds, direct investment and mezzanine debt.
Such instances of consolidation is expected to happen more often in the fund of funds industry, particularly as European insurance companies strive to manage their portfolios to meet the legal requirements of Solvency II. Indeed it was confirmed that the directive was a contributing factor in the decision making process for this sale by Groupama, in addition to a need to strengthen the financial situation of the group.