Adveq and ‘vultures’ about to prey upon distress – is this a sign?

Adveq, a Swiss private equity fund-of-funds (FoF) manager, will launch a new FoF for inclusion in its ‘Opportunity’ program within the next month.

Adveq Opportunity II (AOFII) will invest primarily in distressed funds, whose managers buy debt and equity holdings in ailing companies, often earning them a ‘vulture’ tag. AOFII has already raised $US300 million and should build upon Adveq Opportunity I, which closed with $US300 million in 2005, to “double the size of the program”, Adveq managing director, Peter Laib, said yesterday. “There is strong interest from investors on the distressed side. They are not shying away from vanilla portfolios but want more diversification.” So far, 12 investors have committed to AOFII. Adveq expects to enact the first close in early May. Laib, who manages the Adveq Opportunity program, said much of the capital raised for AOFII came from investors with a sophisticated knowledge of private equity and its changing capabilities. “These are experienced investors with significant allocations who really understand private equity and can anticipate changes. They’re not followers.” While 90 per cent of funds grouped in the Opportunity program buy either debt or equity stakes in distressed companies, approximately 10 per cent invest in ‘special situations’, such as intellectual property and insurance companies. Recent bullish activity by vulture funds in the US, such as hiring extra staff, has prompted some commentators to predict a deterioration in business conditions in some sectors, especially housing. Meanwhile, Laib indicated that Adveq has received a fresh tender from an Australian superannuation fund. Of Adveq’s 12 Australian clients, several are super funds