Closed Loop Partners, which has recruited Amazon and other big-name investors to its circular-economy strategy, launched a first private equity fund at a target of $300 million, according to an SEC filing.
Closed Loop Leadership Fund secured an undisclosed amount in an initial close in September, a person with knowledge of the matter told Buyouts. It is expected to wrap up in mid-2020, the source said.
In a statement issued this month, Closed Loop said it is seeking fund commitments from corporate investors, family offices, foundations and other institutions. Martin Aares, a managing director with the New York-based firm, declined to comment.
The fund will make control investments in mid-market businesses in the recycling, food and agriculture, fashion and apparel and packaging sectors. It will mostly back North American companies with Ebitda of more than $5 million that present scaling opportunities in the range of 2x to 4x Ebitda.
The fund is part of a family of Closed Loop vehicles that invest in the circular economy—or supply chains that help industry become less reliant on raw materials and extend the life of products. Research by McKinsey and others indicates circular supply chains focused on the recovery, recycling and reuse of goods can reduce waste and manufacturing costs.
Closed Loop was founded in 2014 by Ron Gonen, formerly New York City’s deputy commissioner of sanitation, and Rob Kaplan, formerly Walmart’s director of sustainability.
One of Closed Loop’s first initiatives was a $100 million project finance fund backed by a long lineup of strategic investors, including Amazon, Coca-Cola, Colgate-Palmolive, Danone, Johnson & Johnson, PepsiCo, Procter & Gamble, Unilever, Starbucks and Walmart. It also later unveiled a tech seed fund.
Formation of a PE vehicle marks the strategy’s third pillar, Aares told Buyouts, intended to make Closed Loop a “capital provider across the value chain.” The fund will invest in eight to 10 companies that “can accelerate growth through greenfield expansion and bolt-on acquisitions,” he said.
Aares said “huge macro drivers” of circular supply chains, such as increasing consumer demand for sustainable products, will contribute to the fund’s performance. It is targeting a net IRR of 15 percent.
Earlier in October, the fund closed its inaugural deal, acquiring a majority stake in Balcones Resources, an Austin-based provider of recycling services. Closed Loop is looking to scale Balcones’ operations in U.S. markets, introduce new technologies and enhance cash-flow stability through long-term contracts, Aares said.
Aares joined Closed Loop last year to co-manage the fund. He began his career as a management consultant at Stern Stewart and investment banker at Goldman Sachs. Aares later became senior vice president of GE’s renewable energy investment arm and, between 2007 and 2017, was a founding partner of Novus Energy Partners, a clean energy investor, and Traverse Venture Partners, a real estate growth equity firm.
The fund’s other managing directors are Maite Quinn and Michael Gajewski, who also joined in 2018. Quinn was previously a recycling executive with Sims and Sprint, while Gajewski was CFO of Canusa Corp.
Action Item: Read Closed Loop Partners’ 2018 impact report here.