Australian mid-market firm Champ Ventures will be wound up, after talks to merge it with its sister private equity arm failed.
Champ Ventures’ seventh fund had closed in July 2012 at $475 million ($342 million), exceeding its initial target of A$450 million.
But it was generating poor returns, and approaching the end of its investment period. That’s the time for returning unallocated money to investors.
In funds that have poor returns, this means the management fee pool would be drastically reduced. There was little incentive for the firm, headed by Su-Ming Wong, to continue, reports The Australian.
PE firms usually have a five-year investment period to allocate the capital they raise, and get a management fee of about 2 per cent during that time. But if the investments fail, or the firm fails to find suitable avenues to invest in, the money is returned to investors or limited partners (LPs), as they are called in the sector.
In case of poor investment performance, the partners in the firm are unable to get a cut of the profits. The report quoted sources as saying that the returns from the seventh fund was next to nothing.
However, this report in Private Equity International attributed the firm’s closure to lack of succession planning in the firm, an issue that has adversely impacted other PE players in Australia.
In February 2014, parent Champ Private Equity founders Bill Ferris and Joe Skrzynski stepped aside for John Haddock, who was appointed chief executive officer. Haddock has since overseen the firm’s operations and management, while the founders remain at the firm as co-founding partners and co-chairmen.
Investors in the fund include LPs like Alaska Permanent Fund, Telstra Superannuation Fund and Media Super.
Champ Ventures invested between A$20 million and A$55 million in companies valued at up to A$200 million. That included Macpac, a New Zealand-based equipment and clothing retailer.