Direct Capital & ABN Amro launch $120m fund

Thursday 27th November 2008

Direct Capital and ABN Amro Craigs have launched the second of their Pohutukawa private equity investment funds, planning to raise as much as $120 million.

Pohutukawa II will target investments in private companies in Australia and New Zealand seeking funds for growth, including management transactions and taking stakes in businesses as part of a succession strategy, they said in a statement.

The launch is timed to take advantage of the demand from private companies for funds in the face of a global credit squeeze. Pohutukawa II will allow retail investors to participate in investments alongside institutions involved in Direct Capital IV, that firm's latest private equity fund.

"Private companies require capital to fund growth and working capital needs," said Neil Craig, executive chairman of ABN Amro Craigs. "Pohutukawa II is timed to take advantage of favorable market conditions for private equity investing."

The Direct Capital I and II institutional funds achieved returns of about 23% a year and Direct Capital III is returning an annual 32.6%, based on its performance since inception on September 30, Craig said.

Pohutukawa II will focus on "mid-market businesses, in sound industries, with an attractive operating history, proven management and opportunities for growth," said Ross George, managing director of Direct Capital.

Investors would subscribe for $1 shares, with 10 cents of that payable at time of application, along with a 2 cents fee. The remainder is payable in calls of 10 cents apiece upon 30 days notice. The call structure puts retail investors on a similar footing to institutional funds and allows the fund's management to call capital when needed for investment opportunities, Craig said.

The offer is for $60 million of the partly paid shares with provision for a further $60 million in oversubscriptions. It begins November 27 and runs until February 2009.

By Jonathan Underhill

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