MBL macquarie bank limited

Macquarie adds $400m venture capital fund

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    Macquarie adds $400m venture capital fund
    By Anthony Hughes
    May 9 2002

    Macquarie Bank is adding a $400 million venture capital fund to the string of specialist investment funds it has launched in the past few months.

    The new fund, Macquarie Investment Trust IV, plans to take advantage of federal legislation that it is hoped will be in force on July 1, exempting many foreign investors from capital gains tax for investments in emerging Australian companies.

    The fund aims to raise $100 million from foreign investors with the help of the legislation, $150 million from local institutions and $150 million from individuals who make a minimum investment of $20,000.

    According to Macquarie, the $320 million it has invested in the past 20 years had generated overall returns of 31.5 per cent a year for those investments held for more than a year, more than double the 10.7 per cent that was returned by the All Ordinaries Index.

    The bank's investments in 40 companies via other funds have included some winners such as Neverfail Springwater, Millers Self Storage and Cellnet Telecommunications, as well as its share of controversial companies such as National Textiles and Cinema Plus.

    Macquarie often exits via the float of these companies, as it hopes to do later this year when the Melbourne-based JB Hi Fi, an investment in Macquarie Investment Trust III, plans to float on the Australian Stock Exchange.

    The new fund also fits with Macquarie's increasing reliance on performance fees, whereby the bank stands to pick up 20 per cent of the capital gains above inflation achieved by the fund on top of its base fee of 2 per cent a year, reduced by capital returns.

    But not even the fund could stop a 65c fall in the bank's shares to $31.15 as the bank has sought to recover from a steep fall in February after it lowered profit expectations for this year. But in the time since, the bank has expanded and launched several large funds in areas such as communications, film, property and infrastructure, with the help of seed capital.

    Macquarie is expected to contribute around 10 per cent of the capital, or about $40 million, to the new private equity fund.

    The managing director of Macquarie Direct Investment, Sandy Lockhart, said most of the fund's investments would be between $10 million and $60 million, with a preference for majority positions. The fund looked for committed owners and managers with their own money at risk, understandable businesses with reasonable growth prospects, strong and sustainable market share and an ability to realise value through a float or sale in the medium term. The Minister for Industry, Tourism and Resources, Ian Mcfarlane, said the new Venture Capital Limited Partnership legislation could add $1 billion of overseas investment in the Australian private equity sector.
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