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ViaNova launches new European fund of funds with novel fee structure

ViaNova Capital, an independent fund manager, has launched a new E500m European fund of funds into a crowded market confident that its novel fee structure will differentiate it from the competition. The fund will not charge any establishment costs, annual management fee or carried interest.

Instead of these traditional sources of revenue, the management of ViaNova European Buyout 2004, will simply take a two per cent interest in the fund and receive an initial one-off fee from investors which is equal to two per cent of their commitments.

Andrew Evans, the managing partner, said: ‘The fund is aimed at significantly reducing the level of fees typically associated with investing in funds of funds. By moving away from traditional fund of funds fee structures and not replicating charges to investors that have already been paid to managers of the underlying funds, ViaNova will take fewer fees from investors.

‘This will free up significantly more capital for investments, which we believe will enable us to deliver enhanced investor returns,' he said.

Investors habitually grumble about the level of fees charged across the private equity industry. This is particularly the case in the fund of funds sector, where investors complain they pay fees to the manager on top of the fees that are already being paid to the primary fund manager.

ViaNova hopes that its iconoclastic approach to the fee structure of the fund of funds product, as well as a range of other investor-friendly features, will give it sufficient momentum to navigate a hostile fundraising environment.

The fund of funds population has grown dramatically since the mid-1990s and has yet to adjust to the abrupt downturn in private equity fundraising. A recent piece of AltAssets research predicted that about 40 per cent of existing firms, of whom there are in excess of 125, were vulnerable to an imminent consolidation or contraction of the sector.

So far this year only three European funds of funds have managed a final close with a combined total of E876m, compared with 14 funds last year closing on a total of E2.6bn. The story in the US is little brighter. Some six funds have held final closes with a combined total of $1.6bn, compared with 12 funds closing on $7.1bn last year.

There are currently 42 funds of funds in the market, split almost equally between the US and Europe, targeting a combined E9.1bn. Fundraising across the private equity asset class has fallen dramatically this year and looks set to fall a long way short of 2002.

ViaNova's investment strategy will also prize transparency by identifying some 20 or so European buy-out managers that will be the target for 70 per cent of committed capital. The remaining 30 per cent will target rising star managers. The group has an external industry panel to help advise on the European buy-out market, headed by Roger Brooke, the founder and former chairman of Candover.

Evans' private equity pedigree includes periods as both a direct and a fund investor, with UBS, Henderson Venture Managers and Legal and General Ventures. His fellow team members are Edward Gander, formerly a private equity lawyer with Clifford Chance, and Martin Dreher and Thomas Bischoff, formerly of Swiss firm Strategic Capital Management.

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