Palatine braves Brexit chill to raise UK impact fund

The Manchester firm raised £100m for its debut impact fund despite reporting diminished appetite from European LPs in the wake of the Brexit referendum.

Palatine Private Equity, the Manchester-based lower mid-market investor, has held a final close on £100 million ($132.8 million; €111 million) for its debut impact fund.

The fund, which was launched in October 2016 and held a first close on £50 million in January, attracted commitments from new LPs such as Railpen, the Environment Agency and St Bartholomew’s Hospital in London, according to Gary Tipper, the managing partner at Palatine. Existing Palatine investors such as the Greater Manchester, Merseyside and East Riding of Yorkshire County Council pension funds also committed.

US fund of funds Adams Street and Dutch investor Robeco were among the only non-domestic LPs which committed to the fund, Tipper noted.

“All LPs are aware they want to do something in [impact], but at the same time they’ve obviously got to be confident you’re going to make the returns”
Gary Tipper

Palatine’s third buyout fund, a £220 million 2015-vintage focusing on areas such as UK financial services, healthcare and tech, attracted commitments from New York State Common Retirement Fund, Munich-based Golding Capital Partners and French asset manager Access Capital Partners.

“Some European LPs are still cautious about investing in the UK at the moment unless they’ve already got a prior commitment to a fund,” Tipper told PEI. “It’s tougher to get a lot of European investors on the hook.”

The firm is not the first to express concerns over a slowdown from European investors this year.

Palatine Private Equity Impact Investing Fund made its debut investment into electrical training business Trade Skills 4U in August. The fund, which will make approximately 10 to 12 UK investments, is in exclusivity with a further two deals likely to close in late October.

Last year, Palatine hired Zoe Clements as a partner to focus on backing companies with a strong focus on environmental, social and governance principles in their business models.

“There aren’t many impact funds out there,” Tipper added.

“All LPs are aware they want to do something in it, but at the same time they’ve obviously got to be confident you’re going to make the returns, so when any part of the market is still quite embryonic it’s up to the first people into it to prove that we can do that. If we can do that then you’ll see the sector grow.”