Duke Street, the mid-market private equity firm, has restructured its sixth fund following a review run by Lazard. Goldman Sachs and Spain’s Arcano have come in to finance the restructure.
The proposal was supported by 89 per cent of Fund VI investors, with 50 per cent of LPs liquidating their commitments. The remaining LP commitments in Fund VI will be transferred to a new vehicle containing a portfolio of the fund’s six remaining assets, including Wagamama and The Original Factory Shop. Duke Street said the long term realised track record of Fund VI since 2008 has been 2.3x with a 29 per cent IRR.
Duke Street wanted to offer liquidity to LPs in the 2006 vehicle, stating that some of these investors had been considering the age of their own underlying funds while others no longer deemed private equity to be a core part of their investment strategy following the 2008 global financial crisis.
Duke Street adopted a deal-by-deal funding model in 2012, drawing on a “club” of approximately 20 LPs to co-invest in five transactions with a combined enterprise value of more than £700m. Two realisations so far from this model have delivered a combined return of more than 3x.
The Fund VI restructuring progresses this deal-by-deal approach to a hybrid funding model. This will comprise formal capital from a Cornerstone Fund, backed by Goldman and Arcano, which will commit up to 50 per cent of equity investment in new deals. This traditional blind pool will be supplemented by Duke Street’s club of co-investors, several of which have already supported more than one deal, plus the firm’s own general partner contribution.
James Almond, Duke Street partner and head of fundraising at the firm (pictured), said the deal would strengthen Duke Street’s hybrid funding model, offering additional firepower, certainty of funding and flexibility.