CPP Investments Joins Montagu To Back Universal Investment
Montagu, a leading private equity firm, is pleased to announce that it has agreed further investment in Universal Investment Group (Universal Investment) alongside Canada Pension Plan Investment Board (CPP Investments), who will acquire a significant stake through CPP Investment Board Europe Sarl. The strategic partnership of Montagu and CPP Investments is set to accelerate Universal Investment’s growth trajectory and support its ambition of becoming a leading global fund services player. The transaction is subject to regulatory approvals.
Universal Investment is a leading third-party management company (ManCo) and fund administration service provider serving both institutional investors and asset managers, active across the three largest European fund markets: Germany, Ireland, and Luxembourg. The business has delivered resilient and consistent growth over the past 15 years, driven by structural tailwinds in its markets, a strong competitive positioning from dedication to its clients, and a commitment to operational excellence.
Michael Reinhard, CEO, Universal Investment said “Our development into one of the fastest growing European fund service platforms was a decisive factor for CPP Investments to invest. Backed by the great partnership with Montagu we have leveraged our full potential and have become one of the few players active in Germany, Ireland and Luxembourg, offering not only ManCo services but also fund administration and distribution services. We are delighted to welcome CPP Investments and with both investors by our side, we are excited to take on a more global perspective for the business.”
Since Montagu’s investment in 2017, Universal Investment has expanded its platform and added expert capabilities, launched new best-in-class service offerings, and internationalised the business. Today, Universal Investment is the market leading third-party ManCo in Germany and Luxembourg, serves over 470 clients across its core jurisdictions, and has around €760 billion in assets under administration with over 1,100 employees.
Daniel Fischer, Director at Montagu added “We are delighted to welcome CPP Investments to the Universal Investment team. Our relationship with Universal Investment started several years before we completed the acquisition in 2017, and we are pleased to be able to continue the partnership while delivering a strong return for our investors. Universal Investment has performed strongly over the last five years, delivering strong growth in Germany while accelerating its expansion in Luxembourg and entering a new strategic market in Ireland. We have every reason to believe the business will go from strength to strength as it continues to expand its offering across products, asset classes and jurisdictions.”
Commenting for CPP Investments, Hafiz Lalani, Managing Director, and Head of European Direct Private Equity, said “Universal Investment is a business we’ve followed with keen interest for many years and we have been impressed by its exceptional and resilient growth trajectory and market leading position in the European ManCo and fund administration sector. Our relationship with management and Montagu enabled us to work together to deliver a targeted, bespoke capital solution across our investment capabilities and we look forward to supporting Universal Investment in the next stage of expansion. We are confident this will deliver long-term value for Universal Investment’s customers and employees as well as CPP’s contributors and beneficiaries.”
-ENDS-
About CPP Investments
Canada Pension Plan Investment Board (CPP Investments™) is a professional investment management organization that manages the Fund in the best interest of the more than 21 million contributors and beneficiaries of the Canada Pension Plan. In order to build diversified portfolios of assets, investments are made around the world in public equities, private equities, real estate, infrastructure, and fixed income. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, San Francisco, São Paulo, and Sydney, CPP Investments is governed and managed independently of the Canada Pension Plan and at arm’s length from governments. As per June 30, 2022, the Fund totalled C$523 billion.
For more information, please visit www.cppinvestments.com
About Montagu
Montagu is a leading mid-market private equity firm, committed to finding and growing businesses that make the world work. With deep experience in healthcare and the tech-enablement of essential businesses, Montagu brings proven growth capabilities to help companies achieve their ambitions and unlock the full potential of their business. Montagu is committed to the mid-market, with a specialist in carve-out transactions and other first-time buyout investments. ESG forms an integral part of its strategy, and its commitment to sustainable investment is fully integrated into its investment and value-creation process. Montagu partners with companies with enterprise values between €150 million and €2 billion and has €10bn assets under management.
For more information, please visit www.montagu.com
About Universal Investment
The Universal Investment Group (Universal Investment) is the leading European third party ManCo with a one-stop shop platform offering. Universal Investment has more than €760 billion in assets under administration, administers about 2,000 mutual and special fund mandates, and has more than 1,100 employees across Frankfurt am Main (Germany), Luxembourg, Dublin (Ireland), London (UK), Hamburg (Germany), and Krakow (Poland). Founded in 1968, Universal Investment is an independent platform for institutional investors and asset managers offering administration, structuring, and distribution solutions as well as risk management for securities, real estate, and alternatives. UI labs, UI Enlyte and CAPinside complement the group’s platform with a dedicated technology services offering. Universal Investment is a signatory of the UN Principles of Responsible Investment.
For more information, please visit www.universal-investment.com
Universal Investment also put out a press release stating it has secured a significant investment from CPP Investments and continues its partnership with Montagu:
Universal Investment Group, a leading third-party management company (ManCo) and fund administration service provider, is pleased to announce that it has secured a significant investment from Canada Pension Plan Investment Board (CPP Investments), alongside existing lead investor Montagu. The investment is subject to customary regulatory clearances.
The strategic partnership of Montagu and CPP Investments is set to accelerate Universal Investment’s growth trajectory and support its ambition of becoming a leading global fund services player. Together, Montagu and CPP Investments will continue to safeguard the resilience of Universal Investment’s business model and provide it with a long-term, stable backing, from which clients, business partners, and employees will equally benefit.
Universal Investment serves both institutional investors and asset managers and is active across the three largest European fund domiciles: Germany, Ireland, and Luxembourg. The business has delivered resilient and consistent growth over the past 15 years, driven by structural tailwinds in its markets, a strong competitive positioning from its dedication to its clients, and a commitment to operational excellence.
"Our development into one of the fastest growing European fund service platforms was a decisive factor for CPP Investments to invest. Backed by the great partnership with Montagu we have leveraged our full potential and have become one of the few players active in Germany, Ireland and Luxembourg, offering not only ManCo services but also fund administration and distribution services. We are delighted to welcome CPP Investments and with both investors by our side, we are excited to take on a more global perspective for the business."
The addition of CPP Investments to its investor base, with its long-term investment horizon and a clear focus on sustainable investing, is well-aligned with Universal Investment’s business model and its client base, many of whom are institutional investors, including pension funds, themselves. The strategic partnership will support Universal Investment in further driving its geographic expansion, particularly in the North American market. Furthermore, Universal Investment will continue to invest in its home markets to expand the products and services that it offers to institutional investors and asset managers. To strengthen its international growth, Universal Investment recently acquired (subject to regulatory approval) Luxembourg based European Fund Administration (EFA), a leading provider of fund administration services, private asset services, and front-, middle-, and back-office services.
Since Montagu’s investment in 2017, Universal Investment has expanded its platform, added expert capabilities, launched new best-in-class service offerings, and internationalised the business. Today, Universal Investment is the market-leading third-party Super ManCo in Germany and Luxembourg, serves over 470 clients across its core jurisdictions, and has around EUR 760 billion in assets under administration with over 1,100 employees.
CPP Investments is acquiring a significant stake in the Universal Investment, the leading European third party ManCo with a one-stop shop platform offering and more than €760 billion in assets under administration.
Montagu made a follow-on investment in Universal Investment alongside CPP Investments which is taking a minority stake in the business.
The strategic partnership of Montagu and CPP Investments is set to accelerate Universal Investment’s growth trajectory and support its ambition of becoming a leading global fund services player.
I think it worth looking closely at Montagu's value creation plan on Universal Investment to really appreciate why this is a great investment for CPP Investments:
After tracking the business for almost three years, Montagu acquired Universal-Investment (“Universal”), the leading independent provider of management company and fund administration services in Germany and Luxembourg, in January 2017
Full Potential Plan
Through many discussions with management during exclusivity we formulated an investment thesis centered around four core opportunities: accelerating new client wins in core and adjacent markets, further strengthening sales execution, strategic M&A and acquiring key digital capabilities, and operational efficiency improvements.
Sales execution
We worked closely with Universal management in the first years of our investment to realise a complete transformation in the sales execution capability, with a specific focus on:
- Resourcing and organisation – reorienting the sales organisation and salesforce around product units to better match client needs. Investing into more sales resources to support our growth ambitions.
- Sales processes – supporting the business to professionalise their end-to-end sales process, from lead generation and pipeline management to account management and client retention, including implementing and embedding a more value-centric approach to selling.
- International sales – building up an international sales force to market Universal’s Luxembourgish fund platform to international asset managers, with rapid success achieved within two years.
Operational improvement and Tech-enablement
We identified a number of opportunities to further enhance the efficiency of the service operations at Universal and deliver clients a seamless service experience, and worked closely with the business day to day to help drive the necessary process and organisational changes to realise the potential benefits. The programme focused on three key areas:
- Lean transformation and robotic process automation – redesigning critical business processes by mapping value streams and implementing lean methodologies and tools, including leveraging robotics process automation for several activities to reduce cost and improve scalability, consistency, and quality.
- Setup of a branch in Poland – supported the company to move several activities to Krakow, Poland, creating a new centre of excellence in Poland and hiring over 150 highly qualified employees.
- Procurement optimisation – led a thorough procurement review, optimising several areas of spend and implementing new streamlined spend approval processes.
M&A and New geographies
Having identified a potential opportunity to play a role in the consolidation of the market, we have supported Universal to make several strategic acquisitions since our investment, with a focus on geographic expansion and digital capability enhancement:
- Irish fund management company Metzler Ireland Limited was acquired in 2020, helping the company become one of the few providers active both as a fund administrator and management company in Europe’s three leading fund hubs (Germany, Luxembourg and Ireland), with the Irish fund market being the fastest growing.
- CAPinside, a rapidly growing digital and AI based B2B investment platform, was acquired as a key digital building block in Universal-Investment’s strategy to create a ‘single stop’ sales platform that supports fund initiators across all asset classes.
- The acquisition of Labs, a data specialist for financial companies with products and services for data harmonisation, data management and customised data output, further augmented the company’s digital capabilities.
- With Enlyte, Universal has entered the digital asset and fund world, offering a modular investment platform based on distributed ledger technology. Enlyte provides a holistic and comprehensive white label offering for client onboarding to issuance of token-based structures to administration and reporting.
Outcome
Our support on helping Universal achieve its full potential has delivered several great business outcomes since our investment in 2017:
- Won several major new clients
- Substantially increased the share of international clients
- Double-digit organic revenue and EBITDA growth
- Continued market share gains across all markets
- Churn kept at an industry leading minimum with high net promoter scores amongst clients
The success of our continued partnership with Universal is founded on a culture of collaboration, balancing hands-on support for specific initiatives with creating an independent, entrepreneurial and performance-driven culture internally.
We have also provided coaching, mentoring and recruitment support throughout our ownership, all of which have been valued highly by the incumbent management team.
I share this with my readers to appreciate how Montagu has added significant value to Universal Investment and why it retains a majority stake in the company.
It is also worth noting that Montagu won private equity manager of the year in the Sustainable Investment Awards 2022:
Montagu this year became one of the first 10 private equity firms to have its targets to reduce its portfolio and operational emissions in line with a net zero transition validated by the Science Based Targets initiative (SBTi).
As part of this commitment Montagu has pledged to, by 2030, reduce its absolute scope 1 and 2 greenhouse gas (GHG) emissions by 70% from the 2019 base, and increase its sourcing of renewable electricity to 100%, also from the 2019 base of 4%. In 2021, Montagu reduced market-based scope 2 emissions by 44% and achieved 100% renewable energy for its London office.
For its portfolio companies, Montagu has also committed to have 100% of its eligible private equity investments setting SBTi validated targets by 2030, with an interim target of 55% of these investments by 2026. One portfolio company has already committed to setting a validated target, with that submission expected around the middle of the year.
However, rather than just setting targets and leaving portfolio companies to get on with it, Montagu collaborates with a company’s management team to develop individual environmental, social and governance (ESG) action plans that drive specific improvements and hosts roundtables, workshops as well as provides practical support to help reach these ESG targets.
“To drive real improvements in ESG performance across the portfolio, we work closely with the management teams of portfolio companies to develop ESG action plans, which are underpinned by targets, are embedded in the business strategy and owned by the management team,” said Kim Woehl, ESG manager at Montagu. “Beyond providing direct advice, support and training, we want to enable knowledge and resource sharing across the portfolio. That’s why we launched our collaboration platform ‘Montagu Connect’ last year and host regular roundtables.”
In addition, Montagu has emphasised the role of collaboration to accelerate change. To this end the firm is not only a member of initiatives such as the initiative Climate International (iCI), but has contributed to GHG accounting and reporting guidance for private equity firms. Montagu sponsored the design of the guide and was one of eight contributors.
“[Montagu is an] important contributor to the ‘SBTi for private equity’ initiative and focused on walking the talk,” commented one EF Awardsjudge.
Why is this important? Because CPP Investments takes responsible investing very seriously and it selects its partners carefully to make sure they also incorporate ESG considerations in their investment process.
Montagu is now gearing up for a seventh fund and I'm confident they will be successful in raising their target.
Let me end with what Hafiz Lalani, Managing Director, and
Head of European Direct Private Equity at CPP Investments said about this deal:
“Universal Investment is a business we’ve followed with keen interest for many years and we have been impressed by its exceptional and resilient growth trajectory and market leading position in the European ManCo and fund administration sector. Our relationship with management and Montagu enabled us to work together to deliver a targeted, bespoke capital solution across our investment capabilities and we look forward to supporting Universal Investment in the next stage of expansion. We are confident this will deliver long-term value for Universal Investment’s customers and employees as well as CPP’s contributors and beneficiaries.”
I am sure the strategic partnership between Montagu and CPP Investments will help accelerate Universal Investment's growth, including in North America, and support its ambition of becoming one of the world's leading fund services company.
Below, Manuel Stratmann, Senior Portfolio Manager Overlay & Quant Models at
Universal-Investment-Luxembourg S.A., Frankfurt am Main branch explains the Risk Overlay approach, an approach for
managing different risks of a strategic asset allocation taking into
account the risk bearing capacity.
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