Milford to close out new $150m private equity fund early

Brooke Bone from Milford Asset Management. Photo / Natalie Slade

Milford Asset Management will close out its recently launched private equity fund earlier than planned after finding more investor interest than expected.

The fund manager raised $100 million from new and existing clients which its private equity team, headed up by investment directors Brooke Bone and John Johnston, will co-invest with up to a further $50m from Milford's active growth fund.

Bone said the co-investment with Milford's own active growth fund meant it didn't need a large institutional investor as a cornerstone in the latest fund and found good demand among its own customers.

A global environment of low interest rates had spurred the attraction of private equity with investors looking at different asset classes to deliver them returns when equity markets were already showing signs of being fully-valued, he said.

The New Zealand Superannuation Fund this week said it planned to invest $260m in three private equity funds targeting small and medium-sized businesses, which have delivered the pension fund above average returns in the past.

Milford's private equity II fund will invest $10m to $20m in each company, which will include targeting firms seeking capital to expand overseas and local subsidiaries of large corporates, and helping with succession plans for founding shareholders. The open-ended fund's investments will be medium- to long-term holds, and any initial public offerings won't necessarily be used to exit an investment, Bone said.

"We capped the size of the fund to $150m - that enables us to invest $10m-to-$20m per investment," he said. "We think that this is the right size for the New Zealand market."

Bone said the fund won't target any specific sector, and Milford had spread its net far and wide in the past, including unlisted investments in AFT Pharmaceuticals, Orion Health, Volpara, New Zealand Guardian Trust, and Coretex.

Milford's private equity investment committee includes Bone and Johnston, who are joined by the fund manager's principal Brian Gaynor, former Schroders head Lester Gray and Milford's deputy head of investments Jonathan Windust.

Bone said now the fund has raised its capital he can expand the operational side of the team.