Circularity Capital closes Fund II on extended EUR 215m hard-cap

Rede Partners acted as the placement agent and Macfarlanes acted as the legal advisor.

The final close took place on the 25th April 2022. CEGF II held its first close on 29 October 2021 at EUR 133m. The original hard-cap was EUR 150m but this was extended twice before the final close, said Jamie Butterworth, founding partner at Circularity Capital.

The new circular economy vehicle is 3x the size of its predecessor with 80% of commitments from institutional investors, Circularity European Growth Fund (CEGF I), which held a final close of GBP 60m in 2018 and has made eight investments to date including one exit of UK-based ZigZag — an e-commerce software platform that removes retail return waste sold to NYSE listed Global Blue last year. CEGF I is fully deployed and the investment period has been concluded, according to Butterworth.

CEGF II is classified as "Article 9" under the European Union's new Sustainable Finance Disclosure Regulation, according to Butterworth.

The GP did not face any issues during the fundraising phase, Butterworth told Unquote. "The timing of the fundraising was linked to the pace of deployment. We required another fund to invest in attractive circular opportunities that make a positive impact. We went into the Covid period during the fundraising but there was no significant impact, we had to increase the hard cap twice. A lot of the meetings were held virtually," he said.

Investors
LPs in CEGF II include pension funds, insurance companies, sovereign wealth funds, funds of funds, and family offices across the UK, Europe, the US, Canada, and Australia, according to Butterworth. He explained that almost all the LPs from the debut fund have reinvested while some could not due to liquidity restrictions.

CEGF I had around 40% institutional investors, and CEGF II has around 80% of its commitments from institutional investors. Butterworth said the fund was cornerstoned by the two largest LPs in CEGF I. LPs in the debut fund include AXA Investment Managers; BNP Paribas Fortis; Christian Super; Dham; Henkel; Royal Philips; Sitra; TIAA, according to Unquote Data.

Gearing up for investments

The firm made a series of appointments to bolster the team, including Deanna Zhang as investment director, Nicola Keen as operating principal, and Maximillian Bork as investment associate. Butterworth said the firm is continuing to recruit to form a diverse team. The fund is managed by four founding partners: Butterworth; Ian Nolan, who was previously at 3i and the UK Green Investment bank; David Mowat, who was joined from Caird Capital; and Andrew Shannon, who was previously at Foresight.

Butterworth said the fund is pan-European and is only investing in businesses operating in the circular economy. The GP is sector-agnostic and chooses its investments based on business models. It focuses on a few key areas: product as a service, which includes rental models that are subscription-based; products from waste companies, such as when a company takes waste and turns it into something valuable and differentiated; circular design and enabling solutions, such as when a company optimises a way to reduce waste.

Butterworth said the fund will start investing imminently, deploying tickets of around EUR 5m-15m. He added that the vehicle will co-invest with other PE and VC firms.

The GP would typically lead and will also provide opportunities for its LPs to co-invest. The GP said in the statement that it saw a lot of investment opportunities in Europe. Fund II has backed two companies including Germany-based Lendis, a provider of rental services for furniture and electronic, and ReBike, a Germany-based e-mobility company.

People
Circularity Capital - Jamie Butterworth, David Mowat, Ian Nolan, Andrew Shannon (founding partners).

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