PRINT THIS PAGE Institutional Investor Profile: Robert Womsley, European Head of Citi Private Equity 24/10/2007. Source: AltAssets. 
Robert Womsley on Citi Private Equity's fund and direct investments, on the consequences of the US credit crunch and on the future outlook for the private equity business.  Citi Private Equity is part of Citi Alternative Investments, Citi's alternative investments platform. CAI is active across private equity, hedge funds, real estate, structured products and infrastructure. CAI manages capital on behalf of Citi and also third-party institutional and individual investors.
Robert Womsley is a partner at Citi Private Equity and head of European private equity operations. Womsley moved to London from New York in March 2005 to set up and run the European private equity division. Prior to that, he was managing director and global head of Citi's private equity placement group. Previously, Womsley was also a managing director in the financial entrepreneurs group. He joined Citi in 1991, gaining private equity experience in the investment banking division.
What is Citi's background in private equity?
'Whilst not necessarily under the banner of Citi Private Equity, Citi has been investing in private equity for a long time. There are lots of arms within Citi that invest in private equity. The major private equity investment activities within Citi are our team, Citi Private Equity, and the emerging markets enterprise called CVC International.
Citi Private Equity manages and co-ordinates the firm's investment activities in private equity funds, principally buy-out funds but also all other types of private equity funds, including special situation and venture. We do that on behalf of the Citi, our group's employees and third-party clients, via funds of funds. We invest around the globe, into funds in Asia, Europe, North American, Central and Eastern Europe and Latin America.'
Could you tell more about the private equity funds of funds you have raised to date, their sizes and when they closed?
'Citi Private Equity has raised numerous private equity funds since its inception. Our closed funds that represent our fund of funds business include: Citigroup Employee Fund of Funds, which closed in 2000 with $664m in total commitments, Citigroup Private Equity Partners I, which closed in 2003 on $277m and Citigroup Private Equity Partners II, which closed in 2003 with $360m in total commitments.'
How much capital does Citi Private Equity currently have under management?
'As of June this year, $12.7bn.'
How active are you on the direct investment side?
'Our direct investment activities form a major part of what we do. We often directly invest into leveraged buy-outs, as co-investors. We have pretty much moved away from control buy-outs since we spun out of CVC in the US 18 months ago. In the US and Western Europe, we only invest alongside the funds in our portfolio.
At the beginning of this year we closed a $3.3bn third-party fund, Citigroup Capital Partners II, which focuses on co-investments. Most of our co-investments are alongside financial partners, and occasionally alongside corporate partners.'
Which industry sectors and geographies do you like in particular?
'Western Europe and the US are our main geographies, although we invest on a global basis. We have looked at South Africa, Asia and Central and Eastern Europe, and we have invested in funds across all those regions. Our size allows us to know every major player globally.
There is no new or emerging sector that we are particularly interested in at the moment. Obviously, energy remains an interesting sector, and we have been investing in energy-related funds across the globe for a while. We continue to think that it is an interesting sector.
We do not really do much in real estate because we have a Citi property investment arm that deals with those investments. CVC International looks after emerging markets investing in general.'
What size of investments do you usually tend to make?
'We tend to invest from $20m to $25m as a minimum, and anything up to $150m to $200m per fund. Our team has the ability to put more money into a fund if necessary.'
How do you conduct your due diligence?
'Our due diligence process consists of multiple layers. We cooperate with other teams in-house to complete our accounting, legal, commercial and environmental due diligence. Citi network gives us access to a range of fund managers, companies and sponsors.
We analyse the quality of a team's senior partners, their backgrounds and how they compare to their industry peers. A major part of our due diligence focuses on how a team creates value in its portfolio.'
What do you look for in a fund manager?
'Obviously, we try to pick top quartile managers only. We look for consistency and continuity and for an excellent performance track record.'
Do you invest in first-time funds?
'We have a programme to invest in first time funds.'
Do you invest in distressed debt funds at all?
'In our fund of funds we have a bucket for special situation funds, which we use as and when we see market opportunities. In the past, we have invested in distressed or control funds. We have also invested in other funds that perhaps do not fit our normal traditional remit of say large-market US and Western European buy-out funds and US venture funds, for example energy funds and hybrid venture/buy-out funds.'
What do you think of the current state of private equity?
'For us it has been a very active private equity market over the past 18 to 24 months. With the markets being the way they are everyone is expecting some moderation in the investment pace over the remaining part of this year. I think the fundamentals for private equity remain strong.
Obviously the debt markets are not as robust as they have been. I feel that everyone in the industry had an understanding and awareness that that pace at that level was unsustainable.'
How do you see private equity developing in the near future?
'We think there will be a return to a more normalised private equity environment, one as we saw two to five years ago, and as a result our ability to execute deals will remain. A lot of money has been raised for investment in companies and funds, but we think that there are plenty of opportunities out there to put that money to work.
However, we will know a lot more in a couple of months when this backlog of leveraged loans hopefully gets syndicated and moved off the balance sheets so people can focus on new deals and not just getting old deals off their books.'
What is the most pressing issue for private equity at the moment?
'The most immediate issue is that the credit markets are challenged right now by liquidity, or rather the lack of liquidity. This lack of liquidity finds itself in the leveraged loans market. I think there will be good values in that market, with buyers looking to commit loan capital.
The companies sitting on bank balance sheets looking to be syndicated are still good, solid companies that have characteristics of less cyclical industries and as a result should be able to manage high leverage levels. It is just a question of getting that paper placed. And it will just take a matter of time to regain normalcy and return confidence back in the market. We are not there yet, but I think we will get there soon.
Longer and medium-term issues are obviously the fact that governments have become very focused on the private equity industry. This increased scrutiny is bound to have an impact.'
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