Private Capital Investment and Advisory Company, Macaulay Capital PLC – a spin-off from the private capital business of Chelverton Asset Management – has been launched on the Aquis Stock Exchange.

David Horner, founder of Chelverton Asset Management, has launched Macaulay Capital this week to offer co-investment in private companies.

Macaulay Capital, the brainchild of Horner, is a private capital specialist providing investment opportunities for a range of investors – high net worth individuals, professional investors and family offices included – whilst delivering funding solutions for the investee companies concerned.

The firm said it has launched its co-investment programme with a focus on tax-efficient and income generating investment, offering an opportunity for high net worth individuals, family offices and others to co-invest in a series of diversified investment opportunities.

The company will identify and advise on smaller, niche MBO, MBI, equity release and development opportunities, which are typically income generating, with a target yield of 8 per cent.

These will be steadily growing private companies – companies which are expected to qualify for Business Relief after two years under current tax legislation, thereby creating an IHT exemption as well as occasional growth capital under the Enterprise Investment Scheme, the firm said. Macaulay Capital will invest from its own balance sheet alongside third-party investors in each of the non-EIS qualifying opportunities.

Macaulay Capital will be managed by its two executive directors. Horner, with more than 35 years’ experience in corporate finance, will take on the role of managing director, whilst long-time colleague Richard Bucknell, who has led more than 30 investments into SMEs since 1998, will be chief investment officer.

Working together at Chelverton for more than eight years, both have operated in the small-cap private company market for many years, and have experience in identifying, originating, assessing, structuring, and financing transactions, with a string of investments in private companies to their name over the period.

Horner said that for a long-time he has wanted to launch a firm dedicated to investing in private companies, where he believes there are many investment opportunities and less competition. The launch coincides with the decision by Chelverton’s board to wind down its interests in the unlisted space and to focus entirely on its investment funds' business, the firm added.

“Macaulay Capital has raised £2 million ($2.4 million) at launch. A significant proportion of the funds raised are expected to be utilised for co-investment alongside third-party investors,” Horner said.

Macaulay’s approach will differ from the traditional private equity model in that it will not fund acquisitions through excessive debt. Neither will its portfolio of investments be primed for short-term exit strategies.

“We are providing an attractive funding solution for portfolio companies,” Horner stressed. “We invest our own capital and take a seat on the board and, with significant board experience under our belt, we can add value as an investor, our interests with those of both investors and management teams at all times aligned,” he explained.

As an asset class, Horner believes that private capital is a proven tool in portfolio diversification, and has produced impressive and consistent returns for more than 20 years.

“These companies often struggle to attract capital, flying beneath the radar of large private equity houses,” he said. “As such, very few companies offer an opportunity to invest in this area of the market, more so to co-invest, so we are excited to bring Macaulay Capital to market in the current economic environment,” he added.

“We will be looking to identify opportunities to invest in small, well-established, robust businesses, as well as providing occasional opportunities to participate in funding development capital into younger, ambitious, and fast-growing companies – and have already completed our first investment, a management buyout at a South West-based maker of luxury flapjacks,” he said.