Direct Capital, a New Zealand-based private equity firm, has held the first closing of its Direct Capital IV fund on NZ$201.5m ($130m), nearing its final target of NZ$250m ($161m).
The capital raised has mainly come from existing investors in the Direct Capital III fund raised in 2005, and investors have, on average, increased their commitments into Direct Capital IV by a factor of 2.3 times. Investors include the New Zealand Superannuation Fund and Accident Compensation Commission.
Direct Capital IV will continue its predecessor funds’ strategy of investing in private companies valued between NZ$25m ($16.1m) and NZ$150m ($96.8m). There are more than 1,500 companies in New Zealand with annual revenues exceeding NZ$20m ($12.9m) and Direct Capital’s market comprises about 850 of these. It includes companies in which Direct Capital has invested previously such as EziBuy, Ryman Healthcare (in which Direct Capital invested prior to the company’s initial public offering), New Zealand King Salmon, Express Logistics and many others.
“The private company market is New Zealand’s largest equity market, being five to seven times larger than the NZSX for example, and represents more than a third of the economy”, said Ross George, managing director of Direct Capital. “Private companies are the backbone of the New Zealand economy and investing in their growth does more for improving New Zealand’s economic performance than any other single initiative.”
The firm has achieved net annual returns to investors in excess of 20 per cent throughout its 15 year history.
Direct Capital was established in 1994 and has raised more than NZ$600m ($387.3m) to invest in private companies. Recent investments include New Zealand King Salmon, Rodd & Gunn, Go Bus, Shears & Mac4, Innovair, Paper Coaters, New Zealand Pharmaceuticals, and Express Logistics.