PRINT THIS PAGE Institutional Investor Profile: Alexander Jira, founder and CEO, MFonds AG30/05/2006. Source: AltAssets. 
Alexander Jira on why he co-founded MFonds, on their progress and strategy and on private equity investment opportunities in Germany.  MFonds AG is a new private equity fund of funds manager, based in Munich, Germany. The firm was founded in February 2006 by Alexander Jira and Dr Bernhard Engelbrecht.
MFonds are currently starting to raise their first fund of funds, MFonds Private Equity Opportunities, with a target size of at least €20m. The fund will be raised from German retail clients only.
Why did you establish MFonds?
'We believe that this is an excellent time to set up a new private equity fund of funds for German retail investors. Retail clients are increasingly keen to invest in products that promise higher returns. Retail investors start looking increasingly at private equity funds of funds because tax changes in Germany have driven them away from other alternative investment funds such as ship or wind energy funds. Additionally other investment products such as life insurance are less attractive and the retail investors are seaching for investment opportunities with superior returns.'
When will MFonds Private Equity Opportunities hold a first closing?
'The response from distribution organizations so far is very good, we aim at a first closing at the end of this year.'
What type of funds will you target with your new investment vehicle?
'We will invest primarily in smaller and mid-sized buy-out funds and venture capital funds. The plan is to build a portfolio consisting of up to 60 per cent buy-out funds, between 30 and 40 per cent venture capital funds, and we will fill the balance with secondaries. Our geographic focus will be on Europe (UK, France, Scandinavia and Germany, and - to a significantly lesser extent - Central and Eastern Europe) and the US. We might also invest a small amount in Asia.
In terms of industry-sector focus we aim at having great diversification in our portfolio. We like funds that invest in mid-market companies in the mature industries.
We are confident that we will gain access to the top funds through our network of investment advisors and members of our investment committee. We look to commit at least €2m per fund. Our bite size could go up to as much as €10m if we significantly exceed our fund of funds' target size.'
Will you look at first-time funds at all?
'We would not be keen on first-time funds raised by new teams. However, we would definitely look at first-time funds raised by a spin-off.'
How will your due diligence/investment process work?
'As a kind of pre-due diligence and first selection, we will commit only to those funds to which one of our reference funds (large pension and state funds) has already committed.
The funds passing this first hurdle will go through our own due diligence process which will consist of several stages, during which we will primarily analyse a fund's past performance and strategy, the consistency of the strategy, and the stability of the management team. The final decision will be made by our investment committee. As additional experts there are four people on our investment committee: Dr Werner Schauerte, former partner of Atlas Venture and Deutsche Venture Capital and former president of the German Private Equity and Venture Capital Association BVK, Prof. Klaus Nathusius, long time VC investor in Germany and former EVCA chairman, Professor Christoph Kaserer from the University of Munich, focusing on private equity research, and Dr. Christoph von Einem, partner of White&Case.'
What do you look for in a good private equity manager?
'A good GP should have a clear strategy and stick to it. Their past performance and strategy should convince us that they will do well in the future. We also will look on the stability of their team.'
As a player in the German market, how do you see the current state of the German private equity industry?
'I think for buy-outs in the small to mid-market segment, Germany is certainly a very attractive region at the moment. Private equity is becoming increasingly accepted among mid-market company owners. Generally the attitude towards private equity investors is changing. Many more investments have been made public and people appreciate the positive affects that private equity investments can have on the economy.
Another point is, when you look at international private equity firms, they appear to be becoming increasingly active in the German market.'
Do you expect that venture capital will become noticeably bigger in Europe soon?
'As the economy in Europe recovers from the affects of the dot-com crash, the venture capitalists are coming back into the market. There is definitely a need for more venture capital in Europe.'
What are the biggest issues in the private equity industry?
'I believe that there will always be very attractive opportunities in the private equity and venture capital markets, even if there is a downturn in the market. We expect the mid-market buy-out segment to do especially well over the next few years. Private equity funds should be aware of the convergence with hedge funds and should stick to their long term focus and a clear differentiation.'
What advice would you give to a new private equity investor?
'Speaking as an initiator of a fund of funds targeted at the retail market my advice towards an retail investor would be: take private equity into account for your asset allocation and explore the return opportunities of private equity but ensure that you pick a fund of funds with good access to attractive target funds in order to be diversified and invested in attractive portfolio companies. And be aware that the rest of your portfolio is well diversified and your exposure to private equity is reasonable.'
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