This month, a definitive agreement was reached for the US-based private equity fund of funds manager FLAG Capital Management to acquire Hong Kong-headquartered private equity fund of funds manager Squadron Capital. The acquisition is expected to close by 31 December 2012. FLAG invests in private equity through strategy-specific fund of funds vehicles through which it commits to buyout, growth, turnaround, venture capital and natural resources vehicles in the US, Europe and Asia. Squadron Capital has a sole focus on investing in Asia, and is currently raising the third fund of funds vehicle in a series targeting the Asia Pacific region, which includes Australia, China, India, Indonesia, Japan and South Korea. Squadron Asia Pacific Fund III has a $400mn target size.
This transaction is the latest in a number of acquisitions by fund of funds managers of other fund of funds managers, and serves as evidence of consolidation in the private equity space. Earlier this year, BlackRock Private Equity Partners announced it was acquiring Swiss Re’s $7.5bn European private equity arm. The deal was completed in September 2012 and involves Swiss Re Private Equity Partners (SRPEP) outsourcing the management of its investments to BlackRock. Swiss Re launched its private equity business in 1995 and opened it to co-investors in 2002. Swiss Re stated it would continue to hold the underlying investments in SRPEP and plans further private equity investments, mainly through this platform.
In Q4 2011, StepStone Group bought all the assets of private equity fund of funds manager Parish Capital. Stepstone indicated intentions to continue managing out Parish's existing funds of funds, but is unlikely to raise similar vehicles going forward. Instead, StepStone will draw on Parish's experience and expertise in niche and emerging fund managers to offer customized products to its clients. The acquisition further strengthens StepStone’s European investment and advisory presence, adding to its existing operations in Latin America and Asia.