UK lower mid-market firm Palatine Private Equity has held a final close of its maiden impact fund at the £100m hard cap (€110.2m), £25m above target.

The vehicle invests between £2m and £10m in growth companies that can deliver a private equity return and a positive social or environmental impact.

It expects to build a diversified portfolio of businesses which will include themes such as integrated health, ethical consumerism, lifestyle and wellbeing, and the circular economy.

“We have developed a strong pipeline of companies led by people that share our passion to grow companies that make a difference,” Beth Houghton, partner of Palatine Impact, said.

Beth Houghton

The Impact Fund reached its hard-cap in under a year of fundraising and attracted commitments from a diverse group of investors including public pension plans, endowments, consultants, funds of funds and high net-worth individuals.

Several of Palatine’s existing LPs supported the fundraising as well as a number of new investors.

Richard Anthony, Alexander Rayden, Meredith Bourne and Christopher Mockford of Evercore Private Funds Group acted as exclusive placement agent. Kate Downey and Nick Roxburgh of Fried, Frank, Harris, Shriver & Jacobson acted as legal adviser to Palatine.

“Palatine’s Impact Fund successfully attracted a high quality investor base showing how responsible investment and good returns can co-exist,” said Alexander Rayden, managing director of private funds at Evercore.

First deal

Palatine reached a £50m first close for its maiden impact investment vehicle in December after ten weeks on the road. The firm sealed its first deal from the fund in August after backing Trade Skills 4U, a provider of electrical training courses in the UK.

Zoe Clements

Based in Gatwick and Warrington, Trade Skills 4U provides courses for people seeking to become electricians or improve their skills. It focuses on the adult market, seeking to retrain people, including those who have left the military.

Palatine intends to help the business open further training centres across the UK.

The impact team

Palatine’s impact fund team is led by partner Beth Houghton with support from fellow partner Zoe Clements. Houghton was the first non-partner to join Palatine as an associate. She then became investment director and later partner. Houghton has been responsible for developing Palatine’s award-winning ESG procedures. Those efforts laid the pillars of the foundation of the impact fund.

Clements joined the firm’s London office from Epiris (formerly Electra Partners) in November. Tim Farazmand, former BVCA chairman and LDC adviser, chairs the impact fund.

Two of Palatine’s founding partners Tipper and Ed Fazakerley, alongside Farazmand, sit on the fund’s investment committee. This will ensure that the vehicle is focused on returns.

Last month Palatine added James Gregson and Matt Coles to the impact team. Gregson joined Palatine from BDO in May while Coles worked in the transaction services department of PwC until February.

Palatine closed its third flagship fund in June 2015, raising £220m after 11 weeks on the road.

Its second fund is fully invested and has had two exits to date (Playnation, achieving a 2.5x return, and Chase Templeton).

The firm has offices in Manchester, London and Birmingham.

Further reading:

Palatine’s impact investment fund sets a precedent

The story behind Palatine’s £100m debut impact investment fund