Danske Private Equity is committed to the lower-middle market of private equity and invests into the asset class by a combination of primary and secondary fund investments as well as directly co-investing alongside selected fund managers (General Partners).
The investment activities, processes and investment teams are the same
for both primaries, secondaries and co-investments. Our underlying philosophy
for this is that the relationships with our General Partners formed through
primary investing are essential to sourcing and executing secondary
investments as well as co-investments.
The combination of our ongoing and thorough screening processes, our longstanding history and relationships and our experience as an investor in the lower-middle market makes us able to navigate and execute fund commitments in the appealing subset of private equity funds that are hard to find, hard to access and hard to diligence.
Primaries
Primary fund investments, i.e. investments through lower-middle market
private equity funds into portfolio companies is an effective way to obtain
a diversified exposure to the private equity asset class.
The primary activity of Danske Private Equity focuses on capturing alpha by getting access to specialized strategies and segments across the North American and Western European lower-middle market. For this purpose, we are constantly broadening and maintaining our extensive network of relationships with lower-middle market private equity fund managers.
Secondary fund investments involve buying and selling pre-existing investor commitments to private equity funds. Secondary investing is an efficient way of getting vintage diversification into the portfolio and thereby also mitigating the initial return impact of early fees against later returns commonly referred to as the J-curve.
As Danske Private Equity primarily sources these opportunities among previous and current portfolio funds, our approach to secondary investing builds on our primary investment activity and is consistent with our overall investment philosophy. Hence, our secondary efforts focuses on less competitive situations where the process is either controlled by the fund manager or directly sourced from other investors. Our secondary strategy generally targets smaller transactions in quality funds and managers that are well-known to the investment team.
By directly investing into portfolio companies alongside our General Partners and possibly other third party investors, Danske Private Equity expects to achieve higher returns, increased portfolio transparency, higher control and a reduction in overall fees for our investors.
Co-investments represents a unique opportunity to leverage the relationship with the portfolio funds in terms of fund and portfolio company insights, but we believe that investing directly alongside our should only be pursued when all parties - the portfolio company as well as investors and the fund manager - can benefit from it. Our approach has been to leverage our strong primary fund manager relationships. In addition to the requirement that any transaction be within their core strategy, there must be maximum alignment of interest with the fund manager. Given the more concentrated nature of co-investments, great care is taken in the fund manager’s investment analysis and allocation discipline.
Danske Private Equity has had a responsible investment policy since 2002, developed in dialogue with investors and based on the UN Global Compact. Ongoing development of tools and processes draws on the resources and insights of Danske Bank Group’s dedicated ESG functions. Screening for ESG criteria and goals forms an integrated part of the investment selection and monitoring processes. This approach is continuously being refined with an aim to promote corporate responsibility regarding environmental matters, labour rights and anticorruption.
Danske Private Equity co-operates with Danske Wealth Management Sustainability and Impact Investment on the updating of ESG selection and monitoring processes as well as with Danske Wealth Management Alternative Investments on the development of selection and monitoring processes in anticipation of regulatory developments.
As an active contributor to the ESG agenda within Danske Bank Group, Danske Private Equity is featured in this year’s “Our Sustainable Investment Journey 2020” where Claus Heimann Larsen elaborates on our view of ESG integration.
For further information regarding ESG please refer Danske Bank Group’s policies for Sustainable Investments which can be found here.
More than anything else, ESG is to me about good business
- Claus Heimann Larsen, CEO & Managing Partner,
Danske Private Equity
