Pencarrow raises $102m for NZ(2)

The New Zealand private equity firm has held a NZ$124m final close on Fund IV, coming in over target for its largest fund to date.

New Zealand-based private equity firm Pencarrow Private Equity has held a final close on its fourth and largest fund, Pencarrow IV Fund, on NZ$124 million (€78 million; $102 million), according to a statement.

The fund’s target size was NZ$100 million when it first launched, with a hard-cap of NZ$150 million, according to Nigel Bingham, Pencarrow’s executive director.

Pencarrow IV has been marketing since early 2011, and all of the fund’s commitments have come from local New Zealand investors, including a cornerstone NZ$30 million commitment from the New Zealand Superannuation Fund.

Around 80 percent of the fund’s LPs are institutional investors, while 20 percent are high net-worth individuals or smaller companies, Bingham told Private Equity International.

“We have been delighted by the response from local investors to our offering, especially considering the current fundraising environment,” Bingham said in the statement.

The firm tried to market to overseas investors, as well, but because Pencarrow is not as well known outside of New Zealand, and the fund was rather small by international standards, Pencarrow was unable to get much interest, Bingham added. It was the local New Zealand investors that knew Pencarrow well and were willing to re-up.

Pencarrow’s success comes in contrast to Asia's general fundraising climate. In 2012, the region had a 30 percent drop in fundraising, totaling only $31 billion across 76 funds compared to $43.2 billion across 126 funds in 2011, according to PEI’s Research and Analytics division.

Pencarrow’s fund will target management buyouts, succession deals and expansion capital deals only in New Zealand’s mid-market segment, according to the statement. The typical investment size will be between NZ$20 million to NZ$100 million, and focus will be on privately-owned companies looking to expand abroad.

Private equity is a relatively new asset class in New Zealand, but so far has been performing well, Bingham said. Some research shows the average IRR of a private equity investment to be 33 percent in the country, he said.

In all, Pencarrow has invested NZ$225 million in 25 companies since its founding in 1993. Pencarrow’s third fund has already realised four of its six investments, according to the firm, and the vehicle “has been Pencarrow's strongest performing pool of capital”.