Kensington FoF raises $22m ahead of public float

Toronto-based Kensington Capital has doubled the size of its latest fund of funds, after having already committed the capital raised from retail investors. The $45 million vehicle is bound for the Toronto Stock Exchange in coming months.

Kensington Capital has met its target in raising $22 million (€15 million) in a private placement for its Kensington Global Private Equity Fund, a closed-ended fund of funds to be listed on the Toronto Stock Exchange. The firm raised $22.7 million from retail investors in the fund’s April 2007 initial public offering.

“The reason we went back to market is because we had essentially committed all of that initial capital,” said Rick Nathan, a managing director at Kensington.

The fund invests alongside Kensington’s traditional, institutional funds, its Canadian-focused $250 million Kensington Fund IV and its $150 million International Fund I, which targets the US and Europe.

Rick Nathan

In January, the Kensington Global Private Equity Fund committed $2 million to Kilmer Brownfield Equity Fund, a private equity vehicle dedicated to the clean-up of environmentally-impaired “brownfield” properties in Canada, as well as $1.5 million to Bain Capital’s 10th buyout fund.

It is able to gain exposure to megabuyout funds like Bain’s, Nathan said, “by combining and leveraging our other resources”.

Kensington opted to convert a follow-on retail offering for the fund of funds, the prospectus for which was filed in November, to a private placement, Nathan said.

“The timing of our offering was, in hindsight, not the greatest,” he said. The holiday season coupled with public market volatility in January “made it very challenging to be selling a new offering to retail”, he said.

The firm has found the fund to be of great interest to smaller institutions that might be investing a few million dollars as a first private equity allocation.

Nathan said such investors are willing to pay slightly higher fees for access to this fund, rather than Kensington’s institutional funds, in part because net asset values are reported twice monthly – an important feature for pension funds whose beneficiaries are entitled to take their pensions with them when they leave, and thus need current market values.

“The other reason is it gives them liquidity that they don’t have otherwise,” Nathan said. “We have annual redemptions in this fund and we do have a plan to list the units on the Toronto Stock Exchange within the next few months.”

Kensington had initially planed to list the fund, which is technically structured as a mutual fund trust, following the private placement, but has decided to hold off due to market volatility, Nathan said.

The firm expects to commit the freshly raised capital within the next 10 to 12 months.

Founded in 1996, Toronto-based Kensington has more than $350 million in commitments through its fund of funds and direct co-investment programs.