Guardians make commitment to Pencarrow fund providing capital to small and mid-market New Zealand businesses
POSTED ON: 26 October 2011
The Guardians of New Zealand Superannuation today confirmed that they have committed $30 million to the Pencarrow IV Investment Fund LP (the Fund).
The Fund will invest in the growth and expansion of capital constrained, privately held small to mid-market New Zealand businesses with sound commercial prospects and quality management teams. Other New Zealand institutions and wealthy individuals have contributed approximately a further $45 million to the Fund, which has a target capitalisation of $150 million.
The commitment is the second to be made to a Pencarrow-managed fund. The Guardians invested $23 million in the previous Pencarrow fund, with a similar mandate, in 2005. The Guardians’ commitment to the Fund is the second to be made under its Expansion Capital Strategy. A backgrounder on the strategy is available here.
The Guardians’ General Manager, Investments, Matt Whineray, said that the Guardians had identified the provision of expansion capital as a clear opportunity to add value to the New Zealand Superannuation Fund over and above the returns possible to generate from investing passively.
“We are confident that the best way of accessing this investment opportunity is through an external manager,” Mr Whineray said.
The Guardians’ existing commercial relationship with Pencarrow had contributed to Pencarrow meeting the Guardians’ set of hurdles applied to any third party before entrusting them with investing on the Guardians’ behalf. The Guardians have explained this process on pages 24 and 25 of their investment digest – How We Invest.
Executive Director of Pencarrow, Nigel Bingham, welcomed the Guardians as an investor and explained further the Pencarrow investment approach: “We target significant private companies requiring capital and there is limited competition for investments in our target range,” Mr Bingham said.
“These private companies represent the heart of the New Zealand economy. Pencarrow’s style is to partner with existing management teams and owners to provide complementary skills to grow wealth and prosperity for all stakeholders."
The approximately $75 million in commitments received to date will enable Pencarrow to achieve a first close on the Fund. Further commitments will be sought from institutions based in New Zealand, Australia and Asia as Pencarrow moves towards its ultimate target fund size of $150 million.
The Fund will look to make equity investments into private New Zealand companies with enterprise values ranging from $20 million to $100 million. Target companies will have proven business models and a profitable track record and will require further capital to attain growth, expand internationally, or assist with ownership succession.
The Guardians have a significant investment in New Zealand business, with about NZ$4billion or 23% invested in New Zealand equities, infrastructure, property, timber, other private equity and fixed income at 30 September 2011.
For more information please contact:
Paul Gregory, Head of Communications, [email protected], 09 308 2041, 021 274 9994
About Pencarrow Private Equity Management Ltd
Pencarrow is New Zealand’s longest established private equity manager, having established its first fund in 1993. Pencarrow is jointly owned by Nigel Bingham and Rod Gethen. It is focused on investing in and adding value to small to mid-market businesses in New Zealand. For more information visit www.pencarrowpe.co.nz
About the New Zealand Superannuation Fund:
The New Zealand Superannuation Fund, which commenced investing at the end of September 2003, is designed to reduce the tax burden on future New Zealand taxpayers of the cost of New Zealand superannuation. An ageing population means the cost of providing New Zealand superannuation is expected to double over the next 50 years. To prepare for this, the Government has made contributions to the Fund while the cost of superannuation is relatively low. The Fund will invest the money on a prudent but commercial basis and the Government will begin to make withdrawals from 2031, when the cost of superannuation has increased. As at 31 August 2011 the value of the Fund was NZ$17.4 billion. For more information visit www.nzsuperfund.co.nz
About the Expansion Capital Strategy
The commitment to the Pencarrow IV Investment Fund is the second to be made by the Guardians under its Expansion Capital Strategy, which is explained on www.nzsuperfund.co.nz. The first was a $30 million commitment to the Waterman Capital 2 LP Fund, which has so far invested in Working In, an Auckland-based business focused on facilitating the flow of skilled labour to New Zealand and Australian-based mining, infrastructure, financial services, construction and other services; and in Healthcare Holdings Limited, the owner of Auckland’s Mercy and Ascot Hospitals among other investments.