Ethos eyes final close on mid-market fund – Exclusive

The South African firm has also launched its seventh flagship buyout fund, for which it is targeting as much as $755m by early next year.

South Africa-based Ethos Private Equity is looking to hold a final close on just over 2 billion rand ($151 million; €126 million) for its debut mid-market fund in the second half of this year, Private Equity International has learned.

Ethos Mid Market Fund I has attracted the majority of its commitments from returning South African government pensions and institutional investors, Stuart MacKenzie, chief executive of Ethos, said. The fund held a first close on 675 million rand in November and is already 40 percent invested.

Fund I had an initial target of 2 billion rand and a hard-cap of 3 billion rand, according to PEI data.

Ethos Capital, a permanent capital vehicle listed on the Johannesburg Stock Exchange, has made a 550 million rand commitment which will rise to 900 million rand at final close, according to the firm’s half-year results in December. The firm is “pushing” for a final close by the end of the year, MacKenzie said.

“We’re busy with a couple of investors to bring them into the fund but we’re slightly shy of 2 billion rand at the moment,” he said. “We expect to close above that. How much above that will depend on how much of the commitments we get out of the investors we’re working with [currently].”

Ethos is raising three funds. The firm launched its seventh flagship buyout fund in H2 2017, for which it is targeting 8 billion to 10 billion rand by the first quarter of next year.

Fund VII will target small- and medium-sized businesses with enterprise values of around 1.5 billion to 3 billion rand. Ethos Private Equity Fund VI, an $800 million 2011-vintage including commitments from Old Mutual Investment Group and HarbourVest Partners, is almost fully invested, MacKenzie said.

The firm expects to hold a first close on around $150 million for Ethos Mezzanine 3, a 2016-vintage debt vehicle, by the end of this year.

On 19 September South African investors Rand Merchant Investment Holdings and Royal Investment Managers agreed to acquire 20 percent and 10 percent shareholdings in Ethos respectively. The transaction will help fund Ethos’s ongoing transformation from a single fund private equity firm to a multiple fund alternative asset manager, MacKenzie said.

“We realised that we needed to raise capital on to the balance sheet of the management company in order to be able to fund these growth strategies. Up until now the partners have been funding those growth strategies and that’s not going to be sustainable going forward.”