Hutton Collins closes second fund on €570m

The mezzanine and preferred equity investor, founded by two former bankers, has proved its model to investors and raised twice as much as its 2004 debut.

Hutton Collins, a mezzanine and preferred equity provider, has closed its second fund on €570 million, double the amount raised for its 2004 predecessor.

The fund closed in April after six months in the market, but according to Graham Hutton, one of two founding partners, the firm had kept a low profile.

Graham Hutton, founding partner, Hutton Collins

Around 20 investors have made commitments to the new fund, drawn by realisations to date from the first fund, which is showing an internal rate of return of more than 30% and will return more than two times their money.

Hutton said it would probably hit 40% by the time it is fully realised.

Investors in the first fund included blue chip institutions Adams Street Partners, Pantheon Ventures, Northwestern Mutual, Credit Suisse First Boston, Bank of Scotland, Morgan Stanley clients and Martin Currie.

Hutton said most investors had re-invested alongside a number of new investors in the latest fund which has good balance of blue chip investors split evenly between the US and Europe.

Transparent Capital acted as placement agent for both funds.

Hutton Collins is staying with its strategy of investing preferred equity, sitting between mezzanine debt and pure equity in the capital structure.

Hutton said: “We are not just looking for contractual return [as mezzanine debt fund is]. We are an alternative source of capital for private equity funds which would otherwise syndicate some equity to another manager.”

Instead, a private equity fund can enhance the return on its equity by adding extra leverage, using Hutton Collins’ product as well as conventional mezzanine and senior debt.

Hutton expects to invest about €30 million per transaction, an increase of 50 percent over the first fund. But Hutton said it would be a case of syndicating less of each deal and keeping more on its books.

The firm has invested twice from the new fund.  It made a preferred equity investment and a minority equity investment alongside Electra, now known as Cognetas, in Travelsphere, a UK travel company, in May.

In April it backed JVH Gaming, a Dutch arcade and single site slot machine business, taking a preferred equity investment and a substantial minority equity stake in the business.

Hutton founded the firm in 2002 with fellow ex-banker Matthew Collins. The team has grown to 12 investment professionals.