New $100M fund provides SMSFs access to institutional grade PE return

Private equity funds specialist, Vantage Asset Management has launched a new $100 million private equity fund of funds, after almost tripling the return on invested capital from its previous fund over the past eight years.

The Vantage Private Equity Growth 2 (VPEG2) fund mirrors Vantage’s previous fund, Vantage Private Equity Growth Limited (VPEG) in providing investors with access to private equity funds in the later expansion and the mid-market buyout space – where companies typically have an enterprise value between $50 million to $500 million at initial investment.

The investment committee of the fund comprises Rod McGeogh AO, chairman; Michael Tobin, managing director; Patrick Handley; Paul Scully and David Pullini (biographies below).

Prior to establishing Vantage in 2004, Mr Tobin was the head of Development Capital and Private Equity at St George Bank. While at St George, Mr Tobin saw first-hand that the best private equity fund performance was actually in the small to mid-market deals.

Mr Tobin said, “This is the space where private equity can assist in transforming already successful companies through the next stage of their growth, adding products and services, growing market share and becoming dominant players in their sector”.

VPEG2’s features include a tax efficient structure and a focused investment strategy with targeted returns to investors of 20 per cent per annum across a six to eight year investment time frame.

VPEG2 Investors will receive regular distributions as the fund receives them from the underlying company investments, with the bulk of the returns delivered as the underlying companies are sold after being held within the portfolio on average for between two to four years.

VPEG2 has commenced building its private equity investment portfolio and has to date committed $11.5 million across two private equity funds managed by top performing mid-market specialists, Next Capital and Allegro Funds. These funds have to date made investments into three underlying companies in the specialist manufacturing, transport services and aged care industry sectors.

Mr Tobin said, “Not only will an investor in VPEG2 benefit from a diversified portfolio of private equity assets, they can also be comforted by the fact that their money is ultimately being managed by the best private equity practitioners in the country.

“This will ultimately deliver VPEG2 investors the types of returns that have attracted the largest endowment, pension and industry funds globally to this rewarding asset class”, he added.

VPEG2 has already received strong support from local SMSF’s, Family Offices and small institutional investors, as well as clients of Perpetual Private Wealth and many other financial planning and advisory firms nationally.

Established in late 2006, VPEG invested across seven funds managed by some of the best performing Private Equity Fund Managers in the country including well respected firms; Advent, Archer, Crescent, Next Capital and Quadrant Private Equity. These funds in turn invested in 48 businesses across a range of industry sectors, with deals including buyouts of Rebel Sport and MYOB, as well as expansion capital investments in the health care sector with Virtus Health and Genesis Care.

Mr Tobin said, “The 2.93 times return on invested capital delivered to date from the private equity investments exited from our previous fund, VPEG, validate our investment approach that this segment of Private Equity is an investment sweet spot“.

VPEG has delivered consistent returns to investors and has outperformed public markets across the short, medium and long-term timeframes, outperforming the S&P ASX 200 Accumulation Index by 21.6 per cent since 2006.

Mr Tobin said Vantage had solved the access challenge for investors looking at private equity as a way to boost overall portfolio returns but could not find a suitable entry or vehicle for that investment.

The Vantage fund of funds provides a well structured, risk managed, participation for smaller institutions, sophisticated investors and self-managed super funds (SMSF’s) into the high return Private Equity asset class.

Mr Tobin said “While leading high performing global endowment funds, such as Harvard & Yale, allocate up to 50 per cent of their investment portfolios to private equity. Local industry funds allocate up to 20 per cent of their portfolios to this asset class. However Australian SMSF’s currently have an average allocation to private equity of less than 1 per cent, due to their inability to efficiently access the strong returns delivered by this asset class.

“VPEG2’s innovative structure and well defined strategy enables it to be well positioned to provide investors, including SMSF’s, access to this rewarding segment of private equity, which has traditionally for them been inaccessible, due to the high investment minimum’s and the skills and expertise required to participate in this high performing asset class,” he concluded.

VPEG2 will close to new investors by mid-year.