Australia’s Archer Capital cuts size of fund

Peter Wiggs, Archer's CEO, confirmed the action to The Australian, saying the firm was "putting the interests of its LPs first, as always." After slower than expected deployment, an agreement was struck with investors last year to shrink the fund to A$1.2 billion, while retaining the option to return it to the original size. That option has now expired.

It was reported last year that the GP had temporarily lowered the management fee on the fund from 2% to 1.6%. This meant LPs received a discount in acknowledgement of the fact that Archer was holding a larger amount of dry powder than had been anticipated for that point in the cycle.

The fundraising process for Archer Capital Fund 5 took less than four months and the original target of A$1.2 billion was increased in response to strong demand. In the run-up to the fundraise, Archer was among the most active GPs in the market, investing approximately A$600 million across four transactions in 2011 and generating A$2.5 billion from four exits at an average return of 3.2x.

The initial phase of Fund V has been less prolific. Acquisitions include Lend Lease's aged care business, flight services provider Aero-Care from Next Capital, and industrial and mining services specialist LCR Group from CHAMP Private Equity.

This mirrors the Australia and New Zealand private equity markets in general, with less than $7.4 billion deployed since the start of 2014 compared to $14.9 billion for the previous year as a whole. However, even the 2013 figure - the highest in three years - is deceptive, with nearly half the capital going into three infrastructure deals.

The strong IPO markets are routinely cited as a reason for the slow deployment, with sellers opting for the potentially higher valuations offered by a public market exit. On the flip side, of course, private equity firms have taken advantage of the window to exit their existing portfolio companies.

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• Topics
• Australasia
• GPs
• LPs
• Australia
• Archer Capital
• GPs
• LPs