HESTA looks to grow co-investment approach

Industry superannuation fund HESTA has signalled its willingness to embrace further co-investment opportunities at the same time as entering a new arrangement with Stafford Capital Partners.

HESTA and Stafford yesterday confirmed a new $250 million global private equity co-investment ‘QP4’ which follows on from a successful co-investment strategy implemented in 2011.

Commenting on the approach, HESTA head of Portfolio Management, Jeff Brunton said it reflected the manner in which the fund was looking to collaborate with key investment partners.

“We see this co-investment vehicle as effectively an incubator for ideas around certain thematics and gives us valuable perspectives around expertise and successful businesses that can lead to further deal flow,” Brunton said.

“This is a great example of how we’re looking to leverage cutting-edge thinking from across our ecosystem of investment partners to help generate ideas and innovation across the portfolio.”

“It’s this total portfolio approach that’s effectively bringing the best global investment thinking to our decision making, which helps us to continue to deliver strong, long-term investment returns for members.”

Stafford Australian private equity lead, Daniel Bowden referred to the early co-investment mandate with HESTA noting that the $200 million was fully invested in three years and is currently generating strong risk-adjusted returns.

Co-investments had been made alongside leading global private equity managers into companies operating in a diverse range of industries, including healthcare technology, cyber security, sustainable packaging, financial payments and others.

Bowden said that the strategy sought to open up smaller deal sizes, providing access across a wider spectrum of the private equity investible universe. Single-asset style continuation vehicles, where HESTA would represent long-term patient capital, were also an area of focus.

“HESTA, as a large institutional investor, is looking for investment opportunities of appropriate scale that can be efficiently executed. This can mean that potentially strong-returning smaller deals may be more difficult to access. QP3 – and now QP4 – enables Stafford to access and complete smaller strong-returning deals on behalf of HESTA.”

“QP4 is also able to complete co-investments sourced by both the HESTA and Stafford investment teams, benefitting from the relationships both organisations have, and underscoring the importance of a ‘partnership’ style approach to investing that HESTA prefers.”