ABN Amro Craigs behind $50m private equity fund

By Nick Bryant

Friday 27th August 2004

New Zealand's fledgling private equity industry is to get its third major retail fund, following the success of Goldman Sachs JB Were's Hauraki Private Equity No 1 and No 2 Funds, which together have raised about $100 million.

But it's understood the new fund will be friendlier to mum and dad retail investors, with a much lower investment threshold than the Hauraki Funds' $25,000 minimum commitment.

A 50-50 joint venture between broking house ABN Amro Craigs and formerly listed investment company Direct Capital will look to raise $50 million, plus oversubscriptions, in early September.

ABN Amro Craigs' Neil Craig said securities regulations prevented him from being explicit about the proposed fund's strategy before a prospectus hit the streets.

"All I can do is confirm we are preparing to go to the market with a private equity investment company aimed at both retail and wholesale investors," Craig said.

Only recently have New Zealand retail investors had the ability to invest in private equity, although such funds have been commonplace in the US, Europe and Australia for some time.

Private equity funds look to invest in a range of mostly unlisted businesses and are seen as a good opportunity for investors to diversify their exposure.

JB Were's Hauraki investment statement notes: "Average net private equity returns to investors in the US and UK over the past 10 years, based across a range of private equity fund types, exceeded average net returns to investors from relevant comparable listed companies indices by significant amounts."

Just how much opportunity such funds will have to invest and thrive in New Zealand is unknown.

One broking source said, "There's plenty of capacity heaps and a lot of Aussie private equity funds have come into New Zealand already.

"Freightways came from private equity, as did Pacific Retail, and Vertex too."

Another broker said while there were good opportunities, "like all good things, if too many people get in and too much capital comes in, the price of assets tends to go up unwisely and returns go down.

"That's what we've been seeing in the US, where we've seen closures and returns of capital, and you can see the beginning of that in Australia, where the industry is awash with funds because of compulsory savings ... They've just raised about $4 billion in private equity."

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