PRIVATE equity company Anacacia Capital has raised $30 million to start a new fund to invest in listed small to medium enterprises.
Anacacia, which has invested $200m in private companies, has previously helped grow established profitable SMEs like Yumi’s and Rafferty’s Garden.
Jeremy Samuel, Anacacia’s managing director, said the new fund — the Wattle Fund — enabled the company to execute its strategy of focusing on the middle market irrespective of capital structure.
“We found that small and micro-cap chairs and CEOs were crying out for active friendly investors that could help them grow their businesses,” he said.
“Meanwhile, there are fewer and fewer fund managers managing more and more capital [and] that makes it very difficult for them to focus on this area of the market.”
The Wattle Fund focuses on profitable established companies with a market cap between $20m and $200m.
Mr Samuel said the strategy was to keep the fund small like Anacacia’s other funds so they could focus on less than a dozen well-managed companies.
“This enables Wattle to invest approximately $2m to $5m into each listed company from its core fund plus potentially up to $20m to $30m further from its co-investment funds,” he said.
There are more than 1000 companies with a market cap less than $300m but the vast weight of capital from professional managers focuses on the top-300 companies.
“These smaller companies can benefit more from active managers as they often do not have internal strategy and M&A teams that can help them to think about growth options,” Mr Samuel said.
The Wattle Fund allows Anacacia to buy shares on the market but also from placements, selldowns and initial public offerings.
Mr Samuel said Anacacia had successfully and quietly closed the Wattle Fund over the summer after a “lightning” couple of weeks of fund raising.
He said the money raised had predominantly come from existing investors, adding that it was oversubscribed three times above the initial $10m target. The new fund brings Anacacia’s total funds under management to more than $230m.
“Anacacia also have substantial co-investment funds for larger investments to invest alongside the Wattle Fund and may open the fund to further institutions and high net-worth individuals later in the year as the portfolio builds,” Mr Samuel said.
It is understood that Anacacia has produced net annual internal rates of return to its investors in excess of 30 per cent per annum consistently since 2007.
The new Wattle Fund is targeting friendly minority transactions with well-managed businesses where it can be a long-term shareholder and support boards and CEOs to grow the companies, Mr Samuel said. “It can also invest in shares but also, unlike many fund managers, convertible notes that are often attractive to small cap stocks.”