Citywire – Lachlan Colquhoun
Perennial this week launched its Private Ventures fund, the manager’s third private fund for Australian companies.
Portfolio manager Ryan Sohn said the fund will invest in companies that are ‘big enough to list but operationally want to stay private for a bit longer’.
‘We found that we were inundated with opportunities from these companies, and they couldn’t find institutional capital,’ Sohn said.
‘So given we have the pipeline and clearly there is a market need, with companies screaming out for it, we felt that the gap was growing and that this is a natural evolution in the market.’
Sohn says the plan was to invest in companies around two years from a listing, with a market capitalisation of $40m to $300m. The fund will take an equity position of 5% to 20% and is likely to hold onto its stake, or increase it, on listing.
‘The typical profile of the companies will be those with product validation already in the market,’ Sohn said.
‘We think the biggest gap is businesses with revenue of $10m plus which are growing at 150% per annum.’
Sohn said that foreign investors had been active in this space in the Australian market up until the end of 2021, but recent market uncertainty, particularly around valuations, had seen the ‘offshore guys stay close to their home markets’.
‘It’s widened the gap and the opportunity for institutional capital, so we think this is a perfect opportunity to use our pipeline,’ he said.
He agreed the $200m target for the fund was likely ‘conservative’ and said he believed it was an attractive option for institutions and superannuation funds, some of which had already expressed interest.
Perennial has invested in over 80 private companies in the last five years and a third of those have transitioned to IPO or private takeover.
The first Perennial Private to Public Opportunities fund was launched in August 2019 and has returned 169% net of all fees since inception.
This article first appeared on Citywire Australia – click here to read the original article.