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Institutional Investor Profile: Dr Rolf Wickenkamp, Managing Partner, CAM Private Equity15/02/2006. Source: AltAssets. 
Dr Rolf Wickenkamp on why CAM Private Equity likes Continental Europe, on why the firm has increased its investments in venture capital funds globally and on why he thinks that it is a major advantage to have people with direct fund investing experience in a fund of funds management team.  Cologne-headquartered CAM Private Equity was established in 1999. The firm has additional offices in Munich, Amsterdam, Copenhagen and Greenwich (Connecticut). Up until now CAM Private Equity has been solely focused on private equity fund investments. The firm has approximately €1.8bn of assets under management, and that includes the firm's latest fund, CAM III, which closed on €306m at the end of last year.
Insurance companies, pension funds and banks, based in Germany and Austria, have contributed approximately 85 per cent of the capital under management by CAM Private Equity. The remainder is money from high-net-worth individuals and family offices.
Dr Wickenkamp's background is in insurance. He worked for 12 years in the insurance business, on the asset management side. Later on in his career, from 1995 to 1998, he was CFO and member of the board of LGT AG in Zurich, the holding company of the private banking and asset management group, which at that time started its activities in the private equity and hedge fund business. At the end of 1998 Wickenkamp co-founded CAM together with Constantin von Dziembowski.
What is your business strategy?
'We have three business lines: about 70 per cent of our business is managing commingled fund of funds and managing segregated investment programmes for individual clients. More than two thirds is discretionary business, one third is non-discretionary. The third business line is the administration of private equity portfolios, which accounts for about 30 per cent of our assets under management.'
What is your focus in terms of geography?
'For CAM III, which is now more than 50 per cent committed, the target is to have about 50 per cent invested in Europe and up to 50 per cent in the US, with the option to invest up to ten per cent outside Europe and the US, which, practically, means Asia.
We have not made any investments in Asia yet, but we have looked at a significant number of potential deals over the past two to three years. I am convinced that we will make some commitments in the region over the next couple of years. From our point of view, there was absolutely no "first-mover advantage" but as the economic environment is clearly improving and becoming more solid, opportunities get better and more frequent, and we see more experienced teams in different Asian regions.
For buy-out investments, the most interesting areas are the "traditional" economies such as Japan, India or Korea. Investing in China, in our point of view, is still a bit too early because you need mature target companies to be successful in buy-out fund investing. I think China and India are very interesting when it comes to venture capital and expansion capital.
If you look at our major investment regions, the US and Europe, we believe that Europe is more attractive in the buy-out business and the US, without any doubt, is more attractive in venture capital.
The main European countries and regions we invest in - partly via pan-European funds - are, for the time being, the UK, Scandinavia, France and Germany. We are convinced that the European market, and in particular the European mid-market, is probably one of the most attractive segments in private equity these days.
The situation in Central and Eastern Europe is in my point of view very similar to the situation in Asia. We have looked at a number of opportunities in the CEE region over the past years but have not decided to back teams yet. The argument is again that we did not see real "first-mover advantages". Today the legal environment and the private equity markets of countries such as the Czech Republic, Slovakia, Hungary or Poland, show a convincing degree of maturity.'
In which funds have you invested over the past few years?
'We have invested in large funds, including some of the mega funds, but number wise we invested more in smaller and country- or region-focussed funds. CAM committed in the US in funds including Providence, Vestar, Kelso and Platinum, for example; and in Europe in funds including CVC, Charterhouse, PAI, Electra, Advent, Montagu, Accent, ECI, Gilde and Nmás, for example.
In the past we invested up to €15m in venture funds and up to €35m in buy-out funds. The number of commitments per annum is pretty constant and lies between 12 and 15 transactions. I do not expect that there will be a major change in our deal flow and the number of annual commitments in the future.'
How much money do you invest in venture capital?
'Our target allocation for venture capital is up to 20 per cent, leaving 80 per cent for typical later stage investments such as buy-out, expansion capital, turnarounds, special situations, royalty funds, energy and natural resources or mezzanine.
Recently we have increased our commitments into venture capital. In 2000, when CAM started to make its first commitments, it was obviously a good decision to be very cautious about investing in this segment and today our venture capital allocation - life sciences and technology - is roughly 13 per cent. However, things have changed. Valuations are much lower than during the bubble years and there are a great number of attractive investment opportunities in the different venture capital areas.'
Are you interested in co-investment opportunities?
'We have not done any co-investments to date. The main reason is that at the beginning our investors were not experienced enough to be interested in co-investments. This is clearly beginning to change.
As our team members mainly have direct investment experience, we feel that CAM is very well positioned to be active in the co-investments business. Nine of our 12 investments professionals were engaged in direct investing in the past, on behalf of buy-out or venture capital funds as well as on behalf of strategic investors. For our next fund of funds programme, which will be launched later this year, we think about offering co-investment opportunities. The target volume of CAM IV may be in the area of CAM III's size.'
How do you conduct your due diligence?
'Our due diligence process is a very disciplined and formalised process. There are several stages. Every investment professional is responsible for certain segments of the market, for example buy-outs in Scandinavia or buy-outs in the middle-market sector in the UK, in Germany, etc.
The investment professionals research their market segments permanently and look at all the relevant funds coming into the market over a time period of 18 to 24 months. We then check whether their strategy fits with the strategy of our current investment vehicles and how they have performed in the past. In total, we screen about more than 350 funds a year.
In the next phase of our due diligence process we have a more detailed look at the investment strategy of the new fund, do a first evaluation of the management team and an in-depth analysis of past track records on a cash-in/cash-out basis. We also look at their reporting and their fees and costs involved.
If a fund meets the mentioned criteria we go into more thorough due diligence. At that stage site visits take place in every case.
When it comes to the last stages of our process, we build teams of at least two investments professionals - one investment director and one of the partners. Part of this process is to do intensive reference calls. The final investment decision is made by an investment committee.
Out of the 350+ potential investment opportunities that we see on an annual basis, we take between 30 and 40 through our thorough due diligence process. Out of them 12 to 15 will be successful.'
What do you look for in a good private equity manager?
'The quality of the team is most important. Everybody claims that they add value to their portfolio companies, but not all track records shows that they have successfully added value on a consistent basis.
The consistency of the GP's strategy as well as the economic cycles fit of a target fund are additional key factors.'
What advice would you give to a new private equity investor?
'My main advice would be that an investor considering allocating money into private equity for the first time should start with a clearly defined strategy. I think at the beginning it is very important to invest in a very reasonable manner, reducing risk as much as possible.
The second piece of advice is that the investor needs to be prepared to be in the private equity market on a constant basis and not to commit for a couple of years, then pause, and then invest again. You will never get over your J-Curve pain fully if you invest on a stop-and-go basis.
The third and last piece of advice is that a new investor should very closely cooperate either with an experienced fund of funds manager or a private equity advisor, who really understands what the investor is looking for, ie what their risk appetite is, in which legal and regulatory requirements they operate, etc. New private equity investors should not underestimate the fact that there will be a steep learning curve and it is not that easy to understand valuations, distributions, the nature of the J-Curve and so on. Private equity is a very attractive and fascinating asset class, but it has its own rules.'
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