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By Dr. Willi Müller, Head of Portfolio Management at Union Investment Luxembourg as published in Insight/Out magazine #39.
For more than two decades, Union Investment has partnered with Sagard to provide institutional investors with access to Private Equity through a globally diversified investment platform. Since launching its first programme in 2005, the Frankfurt-based asset manager has established six vintages through Union Investment Luxembourg S.A. across two complementary product lines. The platform has expanded steadily over time, with growth accelerating in recent years. Around 500 Institutional Clients did commit to the different vintages of Private Equity and have increased their strategic allocations to private markets in response to different market environment challenges and the search for differentiated sources of return.
Our Private Equity platform has evolved continuously over the past two decades, reflecting both changing market conditions and the growing sophistication of institutional investors. Each successive vintage has built on the experience of its predecessor, enabling us to refine our investment approach while maintaining a consistent long-term philosophy.
A defining element of this development has been the long-standing partnership with Sagard. Throughout multiple economic cycles—including the Global Financial Crisis, the COVID-19 pandemic, and the subsequent period of elevated inflation, rising interest rates and increased market volatility—the collaboration has demonstrated both resilience and adaptability. Equally, it has navigated an evolving regulatory landscape characterised by expanding governance, transparency and reporting requirements.
Over time, the relationship has developed into a strategic partnership founded on complementary capabilities, mutual trust and a shared commitment to serving institutional investors. This stable and well-established framework continues to support the development of differentiated Private Equity solutions while providing clients with continuity across successive investment cycles.
For many institutional investors, portfolios remain dominated by listed equities and fixed income. Within this context, Union Investment considers Private Equity to be an increasingly important strategic allocation, offering enhanced diversification, access to structural growth opportunities and the potential to improve long-term risk-adjusted returns. Periods of market dislocation have further underlined these characteristics.
Union Investment’s Private Equity platform is deliberately structured around closed-end investment vehicles. Rather than encouraging tactical market timing, the firm’s approach is designed to provide investors with consistent exposure across successive market cycles through regularly launched vintage programmes.
“We believe that long-term value creation in Private Equity is achieved through disciplined and continuous capital deployment rather than attempts to anticipate market turning points,” explains Bastian Konle, Head of Product Management for Alternative Investments and Real Estate for Institutional Clients at Union Investment. “Launching new vintages every two to three years enables our clients to build diversified portfolios across different economic environments while maintaining strategic exposure to the asset class over time.”
A central element of Union Investment’s Private Equity strategy is providing institutional investors with access to investment opportunities that are largely unavailable in public markets. As an increasing proportion of corporate value creation takes place before companies reach the public markets—or without a public listing altogether—Private Equity has become an essential component of a well-diversified institutional portfolio.
Equally important is manager selection. Union Investment attributes significant value to Sagard’s long-standing expertise in the global small- and mid-market segment, its extensive international network and its ability to identify proprietary investment opportunities across different geographies and market environments.
“Our institutional client base is diverse, with varying regulatory frameworks, investment objectives and reporting requirements,” says Bastian Konle. “This makes a flexible and collaborative partnership with an experienced private markets specialist particularly valuable.”
Two Product Lines for Different Investor Objectives
Today, Union Investment’s Private Equity offering comprises two complementary strategies designed to address different portfolio objectives.
The flagship programme serves as the core allocation for institutional investors seeking diversified global Private Equity exposure. Having launched five successive vintages, the programme invests across primary fund commitments, secondary transactions and co-investments, providing broad diversification by geography, sector, vintage year and investment strategy.
Recognising growing investor interest in regional investment opportunities, Union Investment introduced its second Private Equity strategy, PE-Unternehmer Deutschland, at the end of 2021. Rather than replicating the globally diversified approach, the strategy focuses on the entrepreneurial strength of the DACH region, targeting leading medium-sized companies with strong competitive positions and attractive long-term growth prospects.
According to David Schoch, Principal and Portfolio Manager at Sagard Private Equity Solutions, the strategy is built around the exceptional depth of the German-speaking mid-market. Germany alone is home to approximately 1,600 so-called hidden champions—companies that combine global market leadership within specialized niches with strong innovation capabilities and resilient business models.
Reflecting this focused investment universe, the portfolio is more concentrated than the flagship programme, comprising approximately 100 underlying companies. At the same time, a significant allocation to secondary transactions and co-investments supports early portfolio diversification, accelerated capital deployment and an attractive risk-return profile.
For institutional investors, the strategy offers targeted exposure to one of Europe’s most resilient economic regions while maintaining the diversification benefits inherent in a professionally managed Private Equity programme.
Creating Value Through Entrepreneurial Partnerships
The investment in Tecvia illustrates the type of opportunity targeted by the PE-Unternehmer Deutschland strategy: established mid-market companies with strong competitive positions, attractive growth prospects and the potential to benefit from long-term strategic development.
Headquartered in Munich, Germany, Tecvia is one of the leading pan-European providers of digital content and software solutions for driver education and professional driver training. Through its integrated technology platform, the company supports the digital transformation of driving schools and training institutions across the entire value chain.
PE-Unternehmer Deutschland 1 invested in Tecvia in 2023, attracted by the company’s strong market position, differentiated business model and positive societal impact. During the investment period, Tecvia successfully accelerated its operational development, achieving significant growth in both revenue and EBITDA.
The subsequent realisation of the investment generated a gross multiple of 4.5x on the original investment made by PE-Unternehmer Deutschland 1, corresponding to an internal rate of return (IRR) of approximately 80%.
For Union Investment and Sagard, Tecvia represents a broader investment philosophy: partnering with high-quality entrepreneurial companies, supporting sustainable value creation and providing institutional investors with access to segments of the economy that remain largely outside public markets.
The German Mittelstand: A Structural Source of Opportunity
The outlook for further investment opportunities within the German Mittelstand remains compelling. A combination of demographic trends, entrepreneurial succession challenges and fragmented ownership structures is expected to create a significant pipeline of potential transactions over the coming years.
According to estimates by Kreditanstalt für Wiederaufbau (KfW), approximately 560,000 small and medium-sized enterprises in Germany are expected to face ownership succession issues by 2027. Research by the Institut für Mittelstandsforschung (IfM) Bonn indicates that around 30% of these companies lack an internal succession solution.
For Private Equity investors with a long-term investment horizon and operational expertise, these developments create attractive opportunities to support established businesses through the next phase of their corporate development.
“Especially in an environment characterized by heightened geopolitical uncertainty, the DACH region continues to benefit from stable legal institutions, strong governance structures and a resilient entrepreneurial ecosystem,” says David Schoch. “For our investors, these characteristics provide an additional layer of security and reinforce the attractiveness of the region as a source of long-term investment opportunities.”
Union Investment is currently preparing the second vintage of the PE-Unternehmer Deutschland strategy, with fundraising scheduled to run from mid-August to mid-November 2026. The continued development of the platform reflects the firm’s long-term commitment to Private Equity as a strategic allocation and its ambition to provide institutional investors with consistent access to attractive private market opportunities.
