Nick Miller
Fortitude Investment Partners (“Fortitude”), a leading private markets investment manager, has launched the Fortitude Small Cap PE Fund, an evergreen fund targeting lower midmarket opportunities in the private equity space.
“We are excited to offer this new fund to the market. The Fortitude Small Cap PE Fund is designed to provide investors with flexible, diversified, access to a range of opportunities in fast-growing, profitable companies in Australia and New Zealand,” Nick Miller, Partner and Co-Founder at Fortitude, said.
The fund will also invest in targeted deal flows in selected sectors of health, digitalisation and technology, energy transition and food and beverage. It will offer quarterly applications and redemptions after a two-year establishment period.
“We have developed this fund to allow investors and advisers to build more sophisticated private equity portfolios and access the attractive lower mid-market sector in Australia and New Zealand,” Miller said.
This segment, which generally refers to private companies with an enterprise value (EV) under $200 million, has historically been the highest performing segment of private equity in Australian and New Zealand, according to Cambridge Associates.
The lower mid-market segment offers a broad range of opportunities, relatively limited competition for transactions, comparatively lower entry prices, and a variety of options for exit. There are more than 68,000 domestic companies in this segment positioned for potential growth and value-oriented exits according to Fortitude.
“We have a rich heritage of identifying high performing businesses, being exceptional growth partners and achieving profitable exits in this segment,” Miller said.
“We have been able to do this because we seek out companies with operating profitably which have also shown a clear competitive advantage, organic growth, and the potential for inorganic growth through mergers and acquisitions,” he added.
In the last several years, individual investors have increasingly embraced semi-liquid evergreen funds to access alternative investments. A shift can also be seen in the institutional market and with family offices. With no drawdown period, evergreen funds provide immediate access to a diversified portfolio and may have the ability to provide some liquidity in a traditionally illiquid asset class.
The Fortitude Small Cap PE fund is the first co-mingled fund from the investment manager, which has previously only invested in single company private equity deals.
“Given it’s higher return potential and differentiated exposure, the Fortitude Small Cap PE fund may work well as satellite allocation alongside more diversified global funds in the private equity space,” Chris Brookman, chief commercial officer at Fortitude said.
“The lower mid-market private equity segment is chronically underserved by the private equity industry, and with few managers specialising in this segment we believe our offer is unique and highly differentiated,” he added.
“Private markets have become a staple of large professionally managed portfolios and now individual investors may create those same allocations with less operational hassle, smaller investment minimums, and optimal diversification by using semi-liquid evergreen funds.”
The fund has a minimum investment of $100,000 and is available for both direct investment and on Hub24 and Netwealth platforms.
Fortitude is well regarded in the market for its strategic acquisitions. One of the defining achievement last year was the sale of Birch & Waite, a Fortitude portfolio company, to Quadrant. Earlier this year Fortitude deepened its footprint in the tech-enabled financial services sector, by acquiring a majority stake in ASF Audits, Australia’s largest independent self-managed super fund (SMSF) audit firm.