5th buyout fund for Duke Street

Duke Street Capital, a mid-market buyout house, has confirmed the launch of its fifth buyout fund, Duke Street Capital V, which has been fund raising this year and expects to close at the mid year point. The target of Duke Street Capital V is o1 billion. This is double the size of Duke Street Capital IV’s target, which eventually closed at o650 million in November 1999. Duke Street Capital Group has said it will invest o50 million into this latest fund.

As with the previous funds, part of Duke Street Capital V will have a portion invested from SG Hambros private clients. This is managed via a feeder fund, which is in turn managed by SG Hambros. SG Hambros private clients can invest a minimum of e40,000 into this vehicle, which is paid in two equal installments 12 months apart. The feeder vehicle then effectively acts as a limited partner in the Duke Street Capital V fund. Funds raised via the feeder vehicle will be part of the o1 billion fund raising exercise and not an addition to it. It is not clear how much will be raised in this manner since SG Hambros will be marketing the vehicle to its private clients over the next two or three months.

Where Duke Street Capital’s resolutely non-technology stance may have discouraged investors with a ferocious appetite for technology at the time of its last fund raising when technology was hot (November 1999), the same stance may have strong appeal now that technology stocks have largely taken a nosedive.

The relationship with SG Hambros exists thanks to Duke Street Capital being known as Hambros European Ventures until June 1998 when it opted for independence following the acquisition of the UK merchant bank by Societe Generale.

Duke Street Capital notes that investors in this SG Hambros-managed feeder vehicle will benefit from business taper relief on their investments. This is a result of the Finance Act 2000. The amount of chargeable gain on the asset (after losses) remaining chargeable to tax after taper relief is 100 per cent if the assets are held for less than a year. Falling to 87.5 per cent if they are held for a year, 75 per cent if they are held for two years, 50 per cent if they are held for three years, and 25 per cent if they are held for four years or more.

Duke Street Capital V will focus on UK and continental European mid-market buyouts. In January this year it promoted Frederic Chauffier to managing director with responsibility for the firm’s continental European activities. Chauffier has been with Duke Street since 1998 and prior to that he was with the private equity operation of Banques Populaires in France.

Duke Street Capital V is anticipated to make 10 to 15 investments and this will include follow-on investments for existing portfolio companies. Duke Street Capital IV is 75 per cent invested and has made six investments in the UK and four in continental Europe.