Palatine Private Equity is understood to be targeting £200 million ($231 million; €232.6 million) for the final close of its second impact fund at the end of the year, a source familiar with the strategy told New Private Markets.
This is double the size of Palatine Impact Fund I, which closed in 2017 on £100 million and is currently being invested. So far, Fund I has made 11 investments and two exits to date: education provider Estio Training in November 2021 and healthcare business Veincentre last month.
Palatine declined to comment on any fundraising progress for Impact Fund II, but partner and head of the impact fund, Beth Houghton, told New Private Markets that being one of the “only impact funds in the UK with a track record of exits has been an important indicator for investors that we can do returns and impact”.
Houghton said: “Impact is still a relatively new asset class and while there are several impact funds in the UK market, not many of them have a track record yet. Europe is a little further ahead, but we are catching up.”
The firm declined to comment on the LP base for the upcoming fund. Investors in the first fund included asset manager Robeco, fund of funds manager Adams Street and public pensions for East Riding of Yorkshire Council, Greater Manchester, Merseyside, the Environment Agency and Railpen.
Palatine Impact Fund II will make investments of up to £30 million in companies that are creating social or environmental change, according to the firm’s website.
Houghton told New Private Markets that the second fund will follow the same strategy as its predecessor, investing “mainly in education, job access, healthcare and climate change”.
Last month, Palatine announced its first investment from Impact Fund II: a significant stake in Inclusive Employers, a UK organisation focused on creating inclusive workplaces.
While Palatine’s impact focus tackles both climate and social issues, Houghton highlighted a gap in funding when it comes to social investments. “Climate is being given a lot more focus right now within the investment community, but it is important that people aren’t left behind. If you look at areas of deprivation in the UK 50 years ago, you are probably looking at the same areas now… there is a real need to get these local economies moving.”
Palatine has several companies in its impact portfolio that actively seek to address social inequalities in the UK. One example is Back2Work, a company headquartered in Manchester that delivers training courses to help long-term unemployed people return to work.
Palatine’s impact strategy is led by Houghton. The firm told New Private Markets that it is looking to expand its impact team in the near future as it continues to pursue this space.