Pantheon cites 'ownership culture' in sale to AMG

"We believe this is really good news for us and our clients," Colin Wimsett, Managing Partner at Pantheon and Chief Investment Officer in the new structure, told AVCJ, citing the need to build a properly incentivized platform within the Pantheon business to secure the goals of both Pantheon's team and its LPs.

"What we have to do is generate long-term outperformance," he continued. "This gives us a culture of ownership."

Partners' new participation

With the deal, Pantheon's existing 21 managing partners are remaining in place, and taking a share of the new partnership with AMG, acquiring roughly 15% of the business, while Russell recoups the sale proceeds. AMG itself will gain exposure to private equity, an area hitherto outside its ambit, through Pantheon and its $22 billion of assets managed on behalf of global institutions. AMG's long-term strategic blueprint apparently included a requirement for a fund of funds business with global reach, to grow its exposure to the asset class and to its international investor base. Pantheon operates offices in the four key venues for global private equity – London, New York, San Francisco and Hong Kong – and has an investment staff of 63 professionals within a total establishment of 141.

"Private equity is a core element of institutional investors' overall asset allocation, and we believe that the asset class will continue to produce superior returns and attract new clients worldwide," said Sean M. Healey, AMG's President and CEO. "We view the fund-of-funds structure as an especially attractive way to participate in this important asset class, given the stability and consistency of its revenue stream, as well as the scalability of its investment platform."

Pantheon's pedigree

Pantheon was originally founded in 1988 by Rhoddy Swire, a scion of Hong Kong's Swire dynasty, and other partners as a management buyout from UK investment group GT Management; and in December 2003, Swire and two other senior partners in the business agreed its sale to Russell Investments, a subsidiary of Northwestern Mutual Life Insurance Company, personally recouping around half of the estimated $280 million proceeds of the sale. Although proceeds of the sale were also shared between other Pantheon employees, the structure of the sale did not apparently include any equity participation in the new business for the remaining partners at Pantheon. Both Russell and the Pantheon partners are understood to have been looking for a new owner for some time.

Wimsett remarked that the new change of ownership is a different story to the Russell transaction, as this time no generational change is involved. He also noted, though, that the firm's new structure includes provisions to equitize future generations of managers, giving a basis for genuinely long-term alignment of interests.

AMG approach

AMG's approach is geared to maintaining the high-performance culture and incentivization of small investment teams, while aggregating them and providing services through a shared platform. The company coordinates a network of management firms totaling $253 billion through equity stakes in their businesses, but keeps a strictly limited level of participation in the actual running of these firms. As an investor in Pantheon, as in its other acquisitions, it will take a decidedly hands-off approach: "The businesses they're buying are people businesses," noted Carsten Huwendiek, Principal at Pantheon.

AMG will not have any active representatives on the Pantheon board and investment committee, and Wimsett stressed that "it's business as usual" for Pantheon post the transition. "We will have operational independence," he underlined. However, other AMG opt-in services – provided at cost to its member/investees – include a distribution platform to reach out to the group's institutional client base, and Pantheon indicated that the firm may consider using this.

SJ Berwin advised Pantheon in the UK and Goodwin Procter in the US on the deal, while Freshfields Bruckhaus Deringer advised AMG in the UK and Paul Weiss Rifkind Wharton & Garrison acted for them in the US, with Skadden Arps Slate Meagher & Flom acting for Russell Investments.

As to Pantheon's prospects for a new impetus post the transaction, the firm certainly appears to be moving quickly into new opportunities, with a deal for a $500 million secondaries mandate recently struck with the China Investment Corporation (CIC) under its existing customized separate accounts program.

"Change is always energizing and exciting," noted Wimsett.

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• Topics
• Fund-of-funds
• Investments
• Fundraising
• Rhoderick M. Swire
• Colin Wimsett
• Pantheon