Five Minutes with Jørgen Kjærnes

The Nordic private equity market is ripe with secondary opportunities

Cubera focuses on acquiring limited partner interests in buyout funds managed by Nordic managers. What makes this such an attractive strategy?

The Nordic region has some excellent managers. They have outperformed European and American peers for decades and are supported by a very strong macroeconomic environment. Our knowledge of Nordic GPs, the funds in the market and the fund positions for sale has enabled us to cherry pick high-quality funds with an attractive value creation potential in the underlying portfolio.

You recently sold a minority stake in RigNet, a publicly-listed energy services business, to KKR. Was this a unique transaction for Cubera?

We typically acquire limited partner interests in Nordic buyout funds but also have the ability to do tail-end fund acquisitions and restructuring. The RigNet deal was unique insofar as it originated from the tail-end acquisition we made from HitecVision III in 2008. We successfully exited all the companies in this portfolio and RigNet was the final asset. Having initially listed RigNet on NASDAQ, we sold the remaining holding to KKR, returning a net 2.9x to our limited partners at the fund level.

Cubera has raised increasingly large funds in the past few years. How has the firm adapted to managing larger pools of capital?

We had previously done annual investment vehicles along with co-investment capital from our LPs. Although our funds are getting bigger, we still have a stable investment pace of approximately €75 million per year. Our latest fund has a more typical structure, meaning a larger fund size and longer investment period.

How would you describe LP appetite for secondaries funds today? What are they looking for specifically within secondaries?

There has been a lot of interest in secondary funds in recent years. The change we have seen is that investors are looking at smaller, more focused managers who have a particular advantage, be it in a certain industry or geography. There are a decreasing amount of big-discount deals on the table and we have found that investors are looking at funds with an information and deal sourcing advantage who really understand what they are buying, where the growth in the portfolio lies, and who can value, source and transact on a deal. A lot of capital has gone to large secondary funds that are all chasing the same intermediated deals containing a large variety of different funds and managers. We feel the returns and the discounts previously achieved by these funds are difficult to sustain.

What type of secondaries transactions are most prevalent in the Nordic market?

The Nordic secondary market looks like the global secondary market in general. We do see less tail-end and direct secondaries but more single LP-interest transactions as well as a number of larger portfolios. We have seen a growing number of transactions originated from portfolio management decisions.