Spire Branford Castle US Private Equity Fund II (USD)

Spire Capital Pty Ltd (“Spire”) continues to have high conviction in select pockets of the global private markets (i.e. ‘sweet spots’).

Within the spectrum of private equity opportunities, the small-mid market typically has relatively attractive entry multiples, malleable business models, aligned management teams and strong exit options. In addition, the recent volatility in public markets and expected slow-down in real economies around the world make for an attractive time to invest in private equity.

The Spire Branford Castle US Private Equity Fund II (USD) (“the Fund”) seeks to deliver steady returns and strong asset growth from US Private Equity. The Fund was established in May 2020 and serves as a USD denominated Australian unlisted unit trust that feeds into the Branford Castle Partners Fund II, L.P. (“the Underlying Fund” or “Fund II”). The Fund will progressively call capital in line with the requirements of the Underlying Fund and operating expenses of the Fund. The Investment Manager for the Underlying Fund is Branford Castle Partners, L.P., (“Branford”). Branford is launching the Underlying Fund to build upon the Firm’s track record of making control investments in strong, privately held “Small-Cap” businesses primarily based in North America. For over three decades, Branford’s professionals have been buying solid Small-Cap businesses, at reasonable prices, then adding value, in the pursuit of generating superior risk-adjusted returns.

Ordinary Units will acquire an interest in the Underlying Fund, which has exposure to US Small-Cap companies. The Underlying Fund will benefit from Branford’s operational capability in delivering for investors through equity and preferred equity positions. Branford’s Small-Cap investment strategy is focused on finding companies with under USD 100m in enterprise value and whose product or service lines typically have less than USD 200m in total industry sales. Many private equity firms overlook the types of Small-Cap companies that Branford invests in, leaving significant actionable opportunities for Branford which often can be purchased for around 6.0x EBITDA or lower.

Branford aims to have the Underlying Fund achieve Gross Returns of 4.0x MOIC with a 40% IRR. These returns are commensurate with Branford’s historical returns. Branford’s Fund I, a USD 116.9m fund that closed in October 2016, as at December 2019 has a Gross MOIC of 2.3x with a 58% IRR (1.6x Net with a 26% IRR). Prior to Fund I, under Branford’s leadership from 2002 to 2016, Branford was able to generate Gross Returns of between 3.5-5.5x MOIC with close to 60% IRRs (2.8x Net, with greater than 45% IRRs). These returns were generated on a deal-by-deal basis beginning with transactions in 2004, with the period being referred to as Branford’s “Pre-Fund” period. To date, Branford has acquired 12 companies (8 platform, 4 bolt-ons) and has now completed its platform investments with Fund I. Given the advanced status of Fund I, Branford is now raising Fund II to continue building on its historical achievements and opportunities in the Small-Cap market. Fund II is seeking aggregate capital commitments of at least USD 250m. Fund II is targeting 10-15 platform businesses, with additional bolt-on investments. Given Branford’s investment pace for Fund I as at December 2019, Branford believes it is already on an investment run-rate of USD 250-350m during a five-year investment period.

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Performance as at 31 December 2023	Net Returns*
3 months	1.55%
6 months	11.41%
1 year	7.05%
Since Inception	19.10%

*Past performance is not an indicator of future performance. Performance table is based on the aggregated total application amount and units issued during the capital raising period and includes Unit Price growth from commencement of NAV based unit pricing following completion of capital raising in November 2021. Unit Price and performance do not include the value of Foreign Income Tax Offsets (FITOs) which have been distributed in addition to cash. Individual investor performance will vary according to the Application Price at which they were issued Units in the Fund.