Just like skilled artisans carefully select premium materials, refine their techniques, and curate each detail to create a work of art – Private Equity investing is a meticulous art. With a keen eye for identifying undervalued assets, adding value through strategic interventions, and ultimately reaping profitable returns, it embodies the art of deliberate and calculated investment craftsmanship.
What is Private Equity
Explained simply as investment into mature private companies that aren’t listed on public stock exchanges, Private Equity plays a vital role within Quayside Holdings’ portfolio strategy. The asset class is incredibly important for the broader NZ economy as it provides private companies access to capital in order to grow and flourish on the national and international stage.
Quayside balances its Private Equity investments with other defensive and growth assets like common stocks and bonds on public exchanges such as the NZX. This strategic balancing act ensures that the portfolio remains stable, liquid, and well-diversified, maximising returns that support a regular distribution to our shareholder, Bay of Plenty Regional Council.
Currently, Private Equity makes up of approximately 20% of Quayside’s investment portfolio. This significant allocation underscores the pivotal role that this asset class plays as a driver of growth and performance. Over the past five years, Private Equity investments have delivered impressive returns, as, Private Equity investments have consistently outperformed Public Equity, showcasing impressive Internal Rate of Return (IRR) figures of 19.39% against the NZX50 returns of 3.16%, within the last 5 years.
This strong track record highlights the value of private equity within Quayside’s investment strategy, showcasing its ability to enhance portfolio growth and generate favourable outcomes.
Why it is essential
Private Equity holds immense importance for Quayside due to its ability to generate substantial returns and fuel portfolio growth beyond inflation rates. By maintaining a diversified portfolio comprising defensive, growth-oriented, and inflation-protected assets, Quayside aims to enhance its investment strategy and achieve market neutrality. The skill-based approach of private equity investment, guided by managers’ expertise in identifying undervalued assets, adding value, and executing successful exits, contributes to exceptional growth and performance within the portfolio. Despite the inherent challenges of managing lumpy and illiquid cash flows associated with Private Equity investments, Quayside strategically balances these with more liquid and defensive assets to maintain portfolio stability and optimise returns.
Who are our partners
Quayside works collaboratively with a diverse group of seven Private Equity managers across thirteen funds, comprising a mix of established Global and local Australasian managers with specialised knowledge of the New Zealand market. Notable managers such as Mercury, Waterman, and Pencarrow bring extensive experience and expertise to the portfolio, managing funds ranging from $200 million to $1 billion. The partnership with local manager Oriens Capital, in which Quayside was a cornerstone investor, is an example of the commitment to regional investments and support for the local ecosystem that drove both lucrative economic return and enabled significant growth of businesses within the region.
By fostering long-term partnerships with managers and aligning interests to drive specific outcomes for the portfolio, Quayside enhances value creation and ensures a focused approach to investment decisions.
“Waterman invests growth capital into mid-market NZ businesses. The capital and skills provided assist these companies to employ more people and invest in the necessary infrastructure to grow significantly for the long-term benefit of NZ Inc. This aligns with Quayside’s long-term values and from a manager perspective we greatly appreciate having a partner in Quayside that not only brings long-term underwriting support but also but also a willingness to collaborate and create value for both.” Says Chris Marshall, Executive Director, Waterman Capital.
Whilst the fund managers may not be widely recognised household names, their expertise and capital investments have made a significant impact on the growth and development of various New Zealand and Australian companies. Among these are notable investments including dairy goods company, the Collective, Interiors Group for well-known brands Carpet Court and Curtain Studio, The Skin Institute, Farro Foods, NZ Clinical Research, Rockit Apples, Findex and Ticketek. Additionally, lesser-known but thriving businesses like Sequent, Fusion 5 and Bay of Plenty founded Bluelab are also on the list.
In summary, Private Equity stands as the growth engine of Quayside’s portfolio, offering a pathway to diversification, growth, and value creation. By partnering with experienced managers, Quayside remains well-positioned to navigate the dynamic landscape of Private Equity investments and drive sustainable returns for the wider portfolio for generations to come.
