Disruptive Capital Finance, the family office which has so far invested on a deal-by-deal basis, is looking to raise up to $1 billion for a new primary vehicle, chairman Edi Truell told Private Equity International.
Truell said he has yet to decide in which currency Disruptive IX will be denominated, but it is likely to be in US dollars. The fund, which is in pre-marketing, was originally expected to seek £500 million ($624 million; €585 million), as reported by PEI.
DCF has also held a final close on its first third-party capital fund on its £75 million hard-cap. The fund, Secondary Disruptive, was oversubscribed.
Truell describes that vehicle as a “top-up” fund; it will invest exclusively in DCF’s existing portfolio of companies, which are expanding globally and require additional capital to keep growing.
The current DCF portfolio of assets has grown from £80 million in autumn 2015 – when it was purely Truell family capital – to £190 million, through organic growth and £75 million of expansion capital from co-investors.
In addition to the top-up fund, DCF has amassed £225 million of co-investment capital which will invest in a sub-set of the firm’s current portfolio – those companies which Truell refers to as ‘stay-rich’ assets as opposed to ‘get-rich’, i.e., more established businesses with a lower risk profile.
Truell told PEI there is sufficient interest in the Disruptive Capital Co-Invest fund to hold an immediate close, with the overflow from the oversubscription on the top-up fund going into the co-investment vehicle.
The funds will charge a management fee of just 1 percent, only on invested capital, with 20 percent carried interest after a hurdle of 7 percent is met. The primary fund will have a four-year investment period and 10-year fund life, while the top-up fund will have a three-year investment period and a total fund life of seven years.
Truell told PEI in October that one of the reasons behind his decision to raise a third-party fund is “it’s about as much effort to do a deal-by-deal fundraising as it is to do a fund”, and that a fund will help DCF improve its execution rate.
“You lose the deal tension, you lose the momentum, you lose that pricing edge,” he said of the time delay inherent in deal-by-deal investing.
“We’ve lost one or two deals where the vendor has said they’re not prepared to wait.”
The primary fund will still look to its investors to co-invest alongside it, as the intention is to build out platform companies which “will finish up as multi-hundred million pound companies”, and would therefore become “disproportionately large” within a fund.
DCF’s existing investments include e-invoice company Tungsten Corporation, which listed on AIM in 2013; Imagine Publishing, vehicle software company Tantalum Corporation; and Atlantic Superconnection, which is developing a power sharing project between the UK and Iceland.
DCF is also a shareholder in the Pensions Insurance Corporation (PIC), which was co-founded by Truell and his brother Danny Truell, and in which CVC Capital Partners acquired a stake of between 10 and 20 percent in February in a deal valuing the business at around £2 billion.
CVC acquired the stakes of several investors using capital from its Strategic Opportunities platform, its longer-term investment vehicle which targets mid-teens returns and expects to hold businesses for between eight and 12 years.