Investors Launch Climate Endowment to Invest in ‘Green Revolution’

A group of international investors are planning to use Ivy League foundation strategies to create a climate endowment that they expect will grow to as large as €40 billion ($45.4 billion) in assets under management over the next 30 years.

The endowment is being launched by Berlin-based family office and impact investing adviser Wermuth Asset Management, along with Munich-based multi-family office AQAL.

The investors said the Climate Endowment will focus on the large scale rollout of sustainable and commercially viable technologies and business models that result in sustainable long-term investment returns, as well as a significant reduction in global CO2 emissions. They also said the endowment will invest in the “champions of the Green Industrial Revolution,” and aims to provide an attractive option for European Union pension funds and insurance companies to invest in.

“The shifting tide of public opinion on climate protection has reached a critical mass,” Jochen Wermuth, principal of Wermuth Asset Management, said in a statement. “I believe there has never been a better time than now for the investment community to step forward and initiate this change.”

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The endowment will attempt to mimic the model for portfolio allocation and investment execution used by Yale and Harvard University endowments. In particular, it will follow the Ivy League schools’ lead in the use of alternative assets with a strong focus on illiquid and hard assets, such as infrastructure, real estate, and private equity. The fund will target the lower-risk return spectrum for the overall portfolio in order to offer conservative investors the opportunity to invest within their risk parameters.

The foundation will initially target infrastructure projects, such as the rollout of solar photovoltaics, new treatment technology for wastewater treatment plants, commercial scale solar roof programs, and the electrification of public transportation. It will invest directly at early project stages, which it said should result in a risk-adjusted diversified portfolio of private and public equities and debt spread across industries and geographies.

Key personnel working for the endowment include Wermuth, who is also an investment committee member of KenFo, Germany’s €24 billion nuclear waste storage financing vehicle; Markus Bodenmeier, co-founder of AQAL AG; and Patrick Horend, former member of the Global Special Situations unit at the Abu Dhabi Investment Council, a sovereign wealth fund.

Additionally, the endowment will be supported by a group of senior advisors that include Mats Andersen, former CEO of Swedish pension fund AP4, Stephen Blyth, former CEO of Harvard Management Co., and Philippe Defosses, former CEO of ERAFP, France’s largest pension fund.

The endowment will also seek to have relatively lower management costs with the help of direct investments made by an in-house team. It also aims to have a clear and transparent corporate governance and external impact verification, particularly in the reduction in CO2 emissions, which will be certified by an external consultant.

The endowment is slated to launch this fall and will be headquartered in Berlin.

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Tags: Climate Change, Climate Endowment, Endowments, Family Offices, Wemuth Asset Management AQAL

The Australian private capital industry has reached a record high of A$30 billion ($20.9 billion) in assets under management as of June 2018, which is the most recent available data, according to financial data and information provider Preqin.

Some 17 Australia-based private equity funds secured a combined A$6.6 billion in fundraising, of which the majority will be earmarked for investments in Australia. The robust fundraising activity means that fund managers now hold A$11 billion in dry powder, an increase of 31% from the end of 2017.

“These figures highlight just how attractive our market is to both local and global investors,” Australian Investment Council Chief Executive Yasser ElAnsary said in a release. “Private capital investment offers an opportunity to provide smart capital to privately backed companies in a relatively low risk environment, and the numbers prove we’re well positioned to do that.”

Buyout funds represented a significant majority of fundraising activity, accounting for 79% of the total capital raised, according to Preqin. Australia-based buyout funds now hold A$20 billion in assets under management. The data showed that since 2012, buyout funds have raised nearly twice as much capital as the rest of the private equity industry combined.

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“More and more businesses are choosing to raise capital from private capital investors today, rather than through public markets, because of the benefits of partnering with venture, private equity, and private credit firms,” said ElAnsary. “Private capital investors can help unlock the growth and expansion opportunities of businesses, in a way that public markets simply cannot,” he added.

During 2018, there were 75 private equity-backed deals in Australia, valued at A$13 billion, and 160 venture capital deals worth A$2.2 billion—an 89% and 77% increase, respectively, compared to the previous year.

IT and consumer sectors represented the largest proportions of these deals at 19% each, with food and agriculture, and health care industries accounting for 16% each. However, health care deals had the greatest proportion of deal value, representing 45% of all private equity capital deployed in Australia in 2018.

The data also found that while leveraged buyouts accounted for the majority of deal activity over the past decade, 2018 saw a significant shift toward mergers and take-private deals. Leveraged buyouts still accounted for the largest proportion of the number of deals at 39%, while add-on and merger deals, and public-to-private transactions, also represented large proportions of overall activity at 30% and 28%, respectively.

ElAnsary said the volume of add-on and merger deals surged to 30% in 2018 from 8% the previous year, which points to a significant uptick in “buy-and-build” strategies where industry expertise can be leveraged to support business growth. He also pointed out that although Australia is only the sixth-largest private capital industry in the region, it’s ahead of China, India, and Japan on a per-capita basis.

“The private equity market in Australia is growing from strength to strength,” said Preqin CEO Mark O’Hare. “Investor appetite is strong, and a growing economy is providing lots of investment opportunities.”

Notable Australian Private Equity Facts:

Private equity investment totaled A$14.7 billion in 2018, comprising A$12.5 billion in buyout and growth deals and A$2.2 billion in venture capital funding.
Software, internet, and energy and utilities were the top three industries for venture capital deals.
Leverage buyouts accounted for 39% of private equity-backed deal numbers, while add-ons and mergers represented 30%, and public-to-private deals represented 28%.

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Tags: Australia, Preqin, Private Capital, Private Equity