Small cap investor aims to raise £200m

Core Growth Capital, a new London-based equity house, has launched to move into the lower end of the UK mid-market.

Stephen Edwards, Walid Fakhry, Angad Paul and David Dancaster are the front men of Core Growth Capital, a newly established equity house looking to invest in small to midsize private companies in the UK.

Paul and Dancaster are chief executive and finance director, respectively, of Caparo Plc, a UK-based publicly listed industrial group that has agreed to sponsor Core Growth and the funds it aims to raise.

According to managing partner Stephen Edwards, Core Growth plans to raise capital primarily from high net worth individuals and wealthy families. The group intends to organise “a stable of funds over the next two to three years”, hoping to attract £200 million (€295 million; $355 million) in commitments, Edwards said.

Core Growth intends to invest in privately owned businesses in the UK valued at £5 to £25 million. “It is very difficult, if not impossible, to raise institutional capital for this kind of strategy, especially in the UK,” commented Edwards in an interview. “Hence we see big gap in the UK market that we can move into.”

The firm’s first fundraising will be conducted through a Venture Capital Trust (VCT) structure, sponsors of which will be announced in the coming weeks, Edwards said. “The structure will provide investors with the tax benefits that VCTs provide, but in other respects the fund will behave very much like a partnership, i.e. invest in a limited number of transactions and distribute returns among the investors”, he added.

The four founding partners and Caparo will contribute 10 per cent of all funds raised out of their own pockets, he added, emphasising that Core Growth would not charge investors any upfront management fees. Instead, the group’s entire compensation would come via a share of the profits generated by its investments. “Our philosophy is that we, as managers, should be rewarded on a performance-only basis, and not be driven by management fees,” stated Edwards. 

Prior to establishing Core Growth, Edwards worked for Grosvenor Venture Managers, Mercury Asset Management and ProVen Private Equity, where he was managing director.

Walid Fakhry is an entrepreneur and private equity investor. His track record includes the formation of Middle Eastern Internet service provider Cyberia. He has also worked for Gemini Consulting in Boston and JP Morgan in London, and has held positions at a number of venture groups.

Caparo was set up in 1968 and specialises mainly in the manufacture and supply of steel and engineering products. In 2003, the group turned over £320 million, according to a press statement.

Core Growth is advised by European law firm SJ Berwin. The firm is based in London.