PRINT THIS PAGE Institutional Investor Profile: Jens Bisgaard-Frantzen, Managing Partner, ATP Private Equity Partners06/06/2006. Source: AltAssets. 
Jens Bisgaard-Frantzen on the qualities ATP Private Equity Partners looks for during the due diligence process, on the importance of long-term LP-GP relationships, on why the firm is keen to invest in industry sector-specific funds, and on the firm's position on Asia.  Copenhagen, Denmark-based fund of funds manager ATP Private Equity Partners currently manages €3.1bn across three investment vehicles: ATP Private Equity Partners I, ATP Private Equity Partners II and Innovationsforeningen ATP Private Equity. The latest fund of funds, ATP Private Equity Partners II, closed on €1bn in April 2005 and is now about 65 per cent committed. ATP PEP receives its capital from Danish pension fund ATP and raises no capital from third parties. ATP did its first investment in a private fund back in 1984. In 2001 ATP established ATP PEP to have a team solely dedicated to private equity investments.
Jens Bisgaard-Frantzen has 16 years of investment experience and has done both investments into private equity funds and investments into companies directly. He is a member of the Investors Relations Committee of the European Venture Capital Association. Bisgaard-Frantzen joined ATP PEP when it was founded in 2001.
The ATP PEP team now consists of 19 people including four partners, all based in Copenhagen. ATP PEP has invested in funds including recent commitments to DBAG V, Quad-C VII, Core Capital Partners II, Apollo Investment Fund VI, Invest Industrial III, BC Partners VIII, Axcel III, LS Power Equity Partners, Bridgepoint Europe III, Celtic House Venture Partners Fund III, Roark Capital Partners, Providence Equity Partners V, Onset Ventures V, Investitori Associate IV, Wicks III, EQT IV and Gresham III.
What type of investments do you look for?
'We invest in buy-out and venture capital funds across Europe and the US. Currently we have about seven per cent of our portfolio committed to or invested in venture capital funds. That is well within our target - we aim to commit approximately ten per cent to venture capital opportunities. Our venture capital investments are in funds that focus mainly on IT and life science companies. The bulk of our capital is in buy-outs, and we also have a smaller amount of money invested in secondaries and co-investments.
About 50 per cent of our portfolio is in generalist funds, with the other 50 per cent being in industry sector-specific funds. We like sector-specific funds because they usually have very in-depth knowledge of their sector and are very able to build relationships with a broader group of industry professionals.
By geography, about half of our investments are in Europe and the other half in the US. We have not made any commitments outside the US and Europe to date but we constantly review new investment opportunities.'
What is your opinion on Asia?
'Economies such as India have grown very fast but they also have their pitfalls. The market seems to offer interesting opportunities but is currently overheated. However, we keep observing the market.'
What size of investments do you make?
'ATP PEP's bite size is €5-75m. Its largest investment ever was €100m. It has become part of our strategy that we are flexible with our investment sizes. While we aim at taking significant stakes, we accept that not every fund can accept large tickets, and in those cases we are happy to commit smaller amounts to maintain and build long-term relationships with our GPs.'
How much capital does ATP allocate to private equity investments?
'Up to 7.5 per cent of the ATP pension fund can be committed to private equity investments. That percentage has come down from up to ten per cent previously but ATP continues to be a committed investor in the asset class.'
How do you find out about good investment opportunities?
'Most GPs in the market know us and that is why they usually approach us, either directly or through our pro-active research. We meet 300-400 GPs on an annual basis and keep track of who is in the market.'
What are the main qualities of a good GP?
'Consistency is a very important factor, and that includes consistency within the team as well as consistency in strategy. We want to see that the team has consistently executed its strategy, based on the investors' expertise. They should also have a consistently strong track record. Their past returns are a strong indicator of the teams' ability to create returns in the buy-out space. In venture, we know from experience that healthy returns require time, and patience is the essence.'
How do you conduct your due diligence?
'For us the key to successful due diligence is to build long-term relationships with GPs. That is the only way to really understand how a team works, how stable a team is, and how a GP adds value to portfolio companies. We spend a lot of time getting to know the teams, in formal and in informal meetings between fundraisings.
We usually nominate one project manager and one associate to each fund that we analyse. Every project manager looks at a portfolio of funds at the same time. The complexity and length of our due diligence process can vary hugely. There is no real start to it because we continuously observe all the important funds in the market. However, due diligence is shorter when we are looking to re-invest with a team because we already know the GP well. We recommit in between 80 to 90 per cent of all cases.
Every investment needs to be approved by our investment committee, which comes together every second week.
Since 2001 we have been in contact with about 900 funds. Currently we analyse between 100 and 120 players who are in the market and we expect to invest with between ten and 15 of them this year.'
What do you think of first-time funds?
'With first-time funds it is even more important to focus on the team issues during the due diligence process. We find out what exactly each team member has done in the past and whether they have worked together before. We usually feel especially comfortable with those fund managers who have spun out of a bigger organisation.
We agree with the general opinion that first-time funds are often managed by young and hungry people. Our experiences with first-time funds have certainly been very good.'
Do you have any concerns about the private equity industry?
'I am a bit concerned about how much money is coming into the asset class. Currently, I think, the market can still absorb the capital, but if the interest in private equity continues to grow, there will be a time when the returns go down. However, there are still a number of countries that could do with more capital and fund managers.'
Has access to the best-performing managers ever been an issue for you?
'I do not see a problem with access but that is probably due to the way we build our relationships with GPs. We communicate with fund managers on a regular basis, even when we are not invested in one of their current funds.'
In which European countries do you see space for growth?
'Many parts of Europe are still underserved, and all the countries - apart from the UK perhaps - need a few more buy-out and venture capital firms and more capital to invest in companies, I believe.'
What advice would you give to a new private equity investor?
'If you decide to start investing in private equity, you will have to allocate appropriate resources to do it properly. Your investment team needs time to build relationships.
Another piece of advice I want to give is invest consistently over the years. In your first year you should not commit more capital than you expect to be able to commit in the fifth year of investment.
Of course, you need to build up a diversified portfolio and have a long-term view. Time horizons are very different in private equity, especially when you are used to investing in public equities.'
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