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Israeli buyout fund raises $800m

Markstone Capital Group has attracted investment from US and Israeli pension funds to invest in late-stage old economy companies in emerging markets.

Markstone Capital Group may not be a household name in international private equity circles yet, but a final close on an $800 million first-time buyout fund announced this week is bound to put the firm on the map. The vehicle is the largest private equity and venture capital fund organised by an Israeli manager to date.

Headquartered in Tel Aviv with an additional office in Los Angeles, Markstone was founded by Elliott Broidy, Ron Lubash and Amir Kess. Broidy, who serves as chairman, is the founder of Broidy Capital Management, a private investment vehicle set up in 1991. According to Markstone’s website, the firm aims to “take advantage of investment opportunities in old economy companies in emerging markets.”

Lubash and Kess are both former investment banker. Lubash latterly ran the Israeli operations of Lehman Brothers, while Kess was CEO of Poalim-M&A, a provider of investment banking services in Israel.

Markstone’s largest investor is New York State Common Retirement Fund, which made a substantial investment. International private equity investment advisors Hamilton Lane advised the pension on its investment in Markstone.

The California Public Employees’ Retirement System (CalPERS) also invested in the new fund, as did a number of Israeli pension pools.

Israel has long been a key market for investors operating in technology-driven venture capital markets, but late-stage private equity investment is in its infancy. “Markstone is Israel’s first buyout fund,” said a source familiar with the group. “They know everyone in that market, and their first-mover advantage is considerable.”

Markstone’s closing comes after First Israel Mezzanine Investors, a Tel Aviv-based provider of bridge financing to Israeli businesses, announced the formation of a $300 million second fund.