French family office Groupe Arnault and the eponymous family's luxury fashion empire LVMH are joining forces with US-based private equity firm Catterton to launch a new global consumer-focused investment firm, L Catterton.
With six distinct fund strategies and expectations to have $12 billion worth of assets under its management once the transaction has been finalised, L Catterton is set to become the largest consumer-focused firm of its kind.
French businessman Bernard Arnault, principal of Groupe Arnault and chairman of LVMH said in a statement: “L Catterton will provide investors with a unique value creation platform, bringing together our global network and industry expertise with Catterton's long-standing operational approach to building value in consumer investments.”
The Arnault family's company LVMH owns a portfolio of luxury brands that includes Louis Vuitton, Dom Perignon and Veuve Clicquot.
A partnership between a family office and private equity firm on this scale is unusual. But, according to Catherine Grum Head of Family Office services at KPMG, such agreements are on the rise – due in part to a low interest rate environment.
“While private equity investing may be nothing new, an increasing number are now starting to approach it via direct investments (alone or as part of a club deal) rather than simply relying on funds.”
Research released by private equity platform iCapital Network in December suggested that 62% of single family offices invest in private equity, with 70% allocating between 10% to 20% of their portfolio. Eight per cent allocated more than 50% to private investments.
And it's not hard to see why. The Global Family Office Report 2015 found that private equity outperformed all other asset classes for Family Offices, with actual returns averaging 15% in 2014.
This trend looks set to continue with just under half of the family offices surveyed by Capital Partners and Private Equity International saying they had increased their allocations to private equity in 2015, and one-third planned further increases in the coming year.
KPMG's Catherine Grum says there's a simple reason why direct investment so often sits more comfortably with many family offices looking to invest.
“The majority of the wealth typically being invested by the family office will have been acquired through the family's own business endeavours. In such situations the choice of making your own specific targeted investments rather than handing over control to a private equity fund often feels very natural.”
L Catterton will be headquartered in Connecticut and London and the joint venture will be led by co-CEOs J Michael Chu and Scott A Dahnke – both currently managing partners at Catterton.
The new partnership will be 60% owned by the partners of L Catterton and 40% jointly owned by LVMH and Groupe Arnault.