Shackleton Ventures is in market with its fifth direct secondaries fund, this time a joint venture.
The Edinburgh-based venture capital firm and Ruffena Capital have launched Shackleton Ruffena Return #5, targeting stakes and portfolios of stakes in companies in the advanced engineering, cleantech, healthcare and digital transformation sectors, according to a statement. The fund can also deploy follow-on capital.
In line with previous vehicles, Fund 5 is targeting a 2.5x return and has completed its first investment, a £1.5 million ($2.1 million; €1.8 million) stake in sales transformation group Mentor Group Limited.
Ruffena is a boutique private equity adviser that executes fundraising mandates of between £2 million and £10 million. It also has its own investment platform. The firm is described as Shackleton’s “joint venture partner” in the statement.
The size of Fund V has not been disclosed and the sizes of its predecessor funds are not clear. Speaking with Secondaries Investor in March, managing partner Hugh Stewart described $100 million as an approximate amount beyond which it would not go in terms of fund size.
“You can get seduced by people wanting to give you large amounts of money,” he said. “You start having to invest in a different way and all the DNA that helped you achieve those returns isn’t appropriate to the deals you’ve got to do.”
The capital for Fund V will be raised on a rolling basis from an LP base comprised of family offices, sophisticated individual investors and some institutions, Stewart said.
Named after Antarctic explorer Ernest Shackleton, the firm sits on the boards of its portfolio companies and looks to manage them out to exit, building stakes in the 15-50 percent range. A significant number of its investments are turnaround opportunities.
“People ask are we smart financiers or do we really get into the technology? No, we’re psychologists… It’s understanding why something isn’t working, where there is a break in the relationship and how you go about fixing that,” Stewart said.
Any challenges should be reflected in the pricing, he added: “A key aspect of secondaries is you don’t pay for the hope… We are paying valuations that reflect the situation today.”
In early June, Shacklewell exited a stake in Exterity Limited, a IPTC technology and digital signage company, to French corporate Vitec, the statement noted. The stake was acquired in 2014 by Shackleton Secondaries 3 as part of a 13-stake portfolio.
The exit moves Fund III into carry, while the firm’s first and second funds have so far produced cash return multiples of 2.1x and 2.9x, per the statement. It is not clear if these figures are gross or net.
Speaking to Secondaries Investor in early June, Olav Ostin, managing partner of direct secondaries firm TempoCap, said he expects a wave of directs portfolios to come to market as corporates decide that VC is no longer a priority during an economic downturn: “It’s easier to sell a portfolio than make deep cuts to the operations of one company,” he said.