Candover starts to raise €5bn for its largest ever buyout fund

The private equity group Candover Investments shrugged off the turmoil in the credit markets to post record returns from existing investments in 2007, and confirmed its had started raising its next multi-billion euro buyout fund.

Candover, the UK-listed private equity investment manager, reported it had generated proceeds of £1.2bn over the year from "realisations" which involved selling or refinancing companies in its portfolio. Candover said its share was £162.4m.

The group added it had officially begun raising its 10th and largest fund with a target of €5bn (£3.8bn). Candover will commit €1bn to the fund with outside investors contributing the rest.

The mid-market-focused company put in a strong performance last year, following a strong underlying performance in its portfolio and the good realisations, according to one analyst.

It boosted its net asset value – a solid indicator of private equity performance – by just over 37 per cent. Net assets per share rose from 1,503p at the end of 2006, to 2,065p a year later.

Iain Scouller, a private equity analyst at UBS, said: "That is a pretty exceptional return from Candover. Over the past three years, listed private equity has delivered strong results, but a 37 per cent rise last year is stellar."

Gerry Grimstone, chairman of Candover Investments, said: "Despite turbulent markets, Candover has continued to perform strongly this year. We have enjoyed record returns from realisations and our European network has shown resilience."

The group exited investments including selling the publishing company Bureau van Dijk to its rival BC Partners, and divesting Dakota, Minnesota & Eastern Railroad. It also floated the oil and gas group Wellstream on the London Stock Exchange.

Investments the group made last year included the buyout of the luxury yacht manufacturer Ferretti, and the theme park operator Parques Reunidos. This year, it finally landed the Dutch industrial group Stork, alongside the consortium partner Marel, after a drawn-out takeover battle.

It was a record year for European buyouts in 2007, but the second half saw a slowdown in private equity activity following the sub-prime crisis. A survey carried out by Incisive Media and Candover found the total value of European private equity transactions in the last three months of the year had fallen 45 per cent on the previous quarter to a total of €21bn.

Mr Grimstone said: "2008 will be a challenging environment in which to operate but history has shown that a downturn in the markets can prove to be a good time for investing." He added that the rate of realisations would be lower than last year, "but I am confident that we are well positioned to make new investments". Those firms operating in the mid-cap range were less affected by the credit crunch than their larger rivals, according to one market expert.

This year Candover is set to expand in Asia. The group hired Jamie Paton to establish a team based in Hong Kong.