Milford to close out new private equity fund early

Milford Asset Management will close out its recently launched private equity fund earlier than planned after finding more investor interest than expected.

The fund manager raised $100 million from new and existing clients which its private equity team, headed up by investment directors Brooke Bone and John Johnston, will co-invest with up to a further $50 million from Milford's active growth fund.

Mr Bone says the co-investment with Milford's own active growth fund means it doesn't need a large institutional investor as a cornerstone in the latest fund. It found good demand among its own customers.

A global environment of low interest rates has spurred the attraction of private equity, with investors looking at different asset classes to deliver returns when equity markets are already showing signs of being fully-valued, he says.

The New Zealand Superannuation Fund this week said it planned to invest $260 million in three private equity funds targeting small and medium-sized businesses, which have delivered the pension fund above average returns in the past.

Milford's private equity II fund will invest $10-20 million in each company, which will include targeting firms seeking capital to expand overseas, local subsidiaries of large corporates, and help with succession plans for founding shareholders.

The open-ended fund's investments will be medium- to long-term holds, and any initial public offerings won't necessarily be used to exit an investment, Mr Bone says.

"We capped the size of the fund to $150 million – that enables us to invest $10-20 million per investment," he says. "We think this is the right size for the New Zealand market.

Mr Bone says the fund won't target any specific sector, and Milford has spread its net far and wide in the past, including unlisted investments in AFT Pharmaceuticals, Orion Health, Volpara, New Zealand Guardian Trust, and Coretex.

Milford's private equity investment committee includes Messrs Bone and Johnston, who are joined by the fund manager's principal Brian Gaynor, former Schroders head Lester Gray and Milford's deputy head of investments Jonathan Windust.

Mr Bone says now the fund has raised its capital he can expand the operational side of the team.

(BusinessDesk)