Private Equity Wire - "Astarte Capital’s ASOP platform brings real asset investors closer to the action"
Astarte Capital Partners is hoping that its new discretionary co-investment platform, the Astarte Special Opportunities Platform (ASOP), will help facilitate investor allocations to European ‘real assets’ and encourage a greater alignment of interests with operating companies over the long term.
“The way we see ourselves is bringing global institutional capital to Europe to invest in real assets,” explains Dr Stavros Siokos, Co-Founder and Managing Partner of Astarte Capital Partners, whose offices sit in South Kensington, London. “We are mainly looking at Europe. Anything west of Poland and anything from Scandinavia to the Mediterranean.
“The reason we launched Astarte is because we see investors wanting to invest in private markets and real assets more than they did previously,” continues Teresa Farmaki, the second co-founder of Astarte. “Investors today have become much more sophisticated in private markets. They increasingly have defined allocations for real assets in their portfolio construction and within those allocations there is an understanding of the benefits to having both core and value-add assets.
“We see that as a growth opportunity for Astarte (and other asset managers).”
What makes the ASOP platform different to other platforms in the marketplace is the distinct emphasis it places on co-investing.
Whereas most institutional fund managers will typically launch a commingled fund vehicle, and allow additional dollar allocations via individual co-investment deals, Astarte takes a different approach. For every investment programme, 10 per cent of assets raised will go in to a discretionary fund vehicle while 90 per cent (of the target AUM) will be offered to LPs as a co-investment.
“Some investors are only interested in discretionary funds, some investors are only interested in co-invest deals; both are symbiotic so we feel it is complementary to offer both sides to investors,” explains Farmaki. “If you want to do deals you need access to capital; you risk losing the best bids if you have to rely on capital solely on a deal by deal basis. That’s why we think it’s important to have control of capital, which we can achieve in the discretionary fund.
“At the same time, some investors may only be able to do co-investments. You need to therefore find the right balance: how much capital do you need to control to build the right pipeline of deals and how much can you rely on as co-investment?”
Astarte launched its first investment fund targeting specialist real estate back in April this year: a GBP400 million closed-end structure focused on transforming prime infill and edge-of-prime real estate into institutional-quality “future core” assets, predominantly across Greater London. The ASOP platform led the investment push, which will involve deploying capital across eight to 10 investments in the hospitality, entertainment, healthcare and education sectors; each of which has the potential to be developed and/or re-positioned as core real estate assets, in Astarte’s eyes.
Indeed, this first investment illustrates Astarte’s investment philosophy, which is to seek out what it calls “future core” real asset opportunities driven by megatrends such as demographics, smart cities and sustainability (i.e. food production, clean water).
“Based on these trends we identify real assets in three sectors: natural resources, transportation and specialist real estate; ie social housing, student accommodation, charging stations for electric vehicles,” says Siokos.
“The next thing we do is to identify what we call “future core” assets and who the main operators are that we could team up with to help them become bigger institutional players with institutional capital behind them.”
He says that the ASOP platform has been structured in order for investors to access more than USD2 billion worth of value-add opportunities in the real assets space.
From an asset class perspective, Astarte believes that core assets in natural resources, transportation, and other areas of infrastructure and real estate represent an overly competitive space. A lot of capital is chasing the same deals and yields are being compressed. However, there are equally attractive value-add opportunities in Europe.
“They are less traditional infrastructure opportunities,” says Farmaki, “and more opportunistic in nature, where we might get more exposure on the operational side rather than just on the asset side.
“These are less crowded, less competitive spaces that have the ability to deliver interesting returns from the assets themselves, as well as by helping the operating company scale up their business and grow.
“Our value proposition to institutional investors is that we help them to source and select assets that are not yet regarded as ‘core assets’ but have the potential to become such. We invest alongside investors to take advantage of the returns we believe we can generate, by growing each of the assets we invest in.”
Institutional investors, by necessity, gravitate to core assets because they are less risky and there are plenty of choices in who to invest with, from an asset management perspective. If they wish to compliment their portfolio with exposure to opportunistic assets, which have the potential to deliver higher returns (especially in a co-investment), the choices are less obvious.
Farmaki points out that for investors to succeed the key is to deploy capital with strong operating partners.
“Being able to source the right operating expertise is vital, and at the same time, being able to align with an asset manager so that both the investor and the manager are focused on the same goal. It’s important to create a deal framework in such a way that the manager is properly aligned with each of their LPs,” she says.
Siokos believes that one interesting area within natural resources is waste management, adding that “renewables is another area we look at, such as energy storage ie logistics centres for storing energy”.
“We haven’t yet done any investments in this space until we feel it becomes an institutional business case but we are keeping a close eye on it,” says Siokos, adding:
“We choose investments with a high ESG impact; forestry (specifically reforestation) is one area we will look to invest. Throughout the life of the fund, part of the carry will be used for education programmes in emerging markets and also to provide micro-finance. It is embedded in our DNA to do these types of things.”
Each of Astarte’s investment funds will be approximately GBP400 million in size, with GBP40 million in discretionary AUM and GBP360 million in co-invest AUM.
“We are now in the process of launching the second platform, which will focus on impact forestry,” concludes Siokos.