Composition Capital Partners, once one of the most active funds of funds businesses in private equity real estate, is to be wound down, PERE can reveal.
The Amsterdam-headquartered firm raised more than $650 million of equity from institutional investors between 2005 and 2007 across four pan-regional funds. But following the death of founder Erwin Stouthamer in early 2016, it became subject to a strategic review, which included the exploration of an asset sale on the secondaries market.
That sale transpired shortly afterwards with Zug-based private markets firm Partners Group acquiring 20 underlying fund positions across the four funds in a transaction with a value believed to be around $100 million.
Chief operating officer, Roderik Mulder, declined to confirm the details of the sale. But he said that the wider business was expected to be wound down by the end of this year. He told PERE: “In agreement with our investors, we’ve decided to wind down the funds and then to wind down the company.”
“First all the underlying structures need selling. Once clean, then we need to wind down the funds themselves, and then the GP and the management,” he added.
While he would not discuss the details of last year’s asset sale, he did say it comprised most of the value left within the vehicles. While another approximately 10 fund positions remained in the funds, these are thought to have minimal residual value and so no further sale process would happen.
Composition Capital was founded by Stouthamer in 2005. That year, the firm launched Composition Capital Europe Fund, for which it collected €142 million, and Composition Capital Asia Fund, which attracted $176 million. Two years later, second funds in each region attracted €184 million and $171 million respectively. Investors in the funds included Harvard Management Company, Rockefeller Foundation and Auburn University, according to PERE Research & Analytics.
Those funds were raised against typical opportunistic fund strategies, with underlying investments including commitments to UK opportunity manager Moorfield Group and Asia-focused Arch Capital.
The funds were expected to yield IRRs of 15 percent or more for investors. But, in part owing to the pre-global financial crisis timing of their fundraisings, they are understood to have fallen short of this performance target. However, the two Asia funds are thought to have managed returns closer to target than their European counterparts. Mulder declined to discuss performance.
Looking ahead, he said the wind down of Composition would be the first assignment of a new investor advisory platform called Blorange. He said: “The new business is centred on advising institutional investors and family offices as well as GPs with issues they may have.”
Specifically, Blorange will offer clients three advisory services. In the first, it will offer structuring, implementation and strategy services; in the second, it will offer investment due diligence, join venture partner assessment and investment governance services; while in the third, it will offer repositioning and restructuring services.
Mulder is currently the sole professional at the firm, but he said there was an intention to introduce new partners before year end.