Kensington began our private equity investment program with the founding of the firm in 1996. To date, Kensington has committed over $1 billion to private equity investments through a succession of private equity programs. In 2002, Kensington began creating Private Equity Partnerships for investors in the private equity market and currently manages several different portfolios in this form. Each of these private partnerships is fully invested and closed to new investors, although we remain active managers of these portfolios.
In 2007, the Kensington Private Equity Fund was created to provide Canadian investors with continuous access to a diversified portfolio of global private equity investments, primarily in North America. Kensington Private Equity Fund remains open for new, Canadian accredited investors. If you would like to learn more about our Kensington Private Equity Fund, please view our fact-sheet below.
Kensingtons private equity strategy is focused on two segments of the private equity market across Canada and the United States:
Mid-Market Buyoutsof mature profitable businesses with total enterprise values typically ranging from $50 to $500 million, where management has developed a compelling plan to create substantial growth over the expected 3- to 5-year cycle. In this segment, we typically target gross internal rate of return (IRRs) of 25%, representing a tripling of equity value over 5 years.
Growth Equity and Venture Capitalopportunities carry greater risk and target higher returns than the buyout sector. These less mature companies must show a strong growth trajectory based on a new technology or disruptive business model, led by an experienced team, in order to attract investment.
Kensington portfolios follow a hybrid strategy investing both in private equity funds and directly into private companies. This approach provides a strong foundation of diversification for risk management with a platform for generating strong returns:
Fund Investmentsprovide diversification and steady long-term returns. In addition to strong financial performance, we work to develop strong business relationships with each fund manager to add value to their portfolios and generate secondary and co-investment opportunities. Kensington invests in primary and secondary fund positions. A typical Kensington portfolio may hold positions in 10 different underlying funds, representing investments in 75 to 100 different companies.
Direct Investmentsin specific companies are designed to create the excess returns in our portfolios. Our direct investments are frequently structured as co-investments led by the managers of our portfolio funds. We also select direct investment opportunities outside of our fund portfolios where we can participate as a member of a strong investor syndicate, and take an active role on the Boards of these companies. By actively building our relationships, we generate strong deal flow to select the best direct investments. A typical Kensington portfolio may hold positions in 10 different direct investments, with a combination of active management relationships and more passive co-investments.
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