Paine Schwartz taps SWF capital to exceed hard-cap on $1.45bn Fund V

CEO Kevin Schwartz says the firm specifically targeted investors outside of its traditional base in the US and Europe, resulting in commitments coming in from institutions in China, Japan and the Middle East.

The addition of new LPs from Asia and the Middle East played a key role in helping Paine Schwartz Partners exceed its hard-cap as it closed its fifth fund on $1.45 billion, said its chief executive.

Founding partner and CEO Kevin Schwartz told Agri Investor that the growth in Fund V’s haul over its $893 million predecessor could be attributed to increases in support from existing investors and the addition of new institutions from regions outside the firm’s traditional fundraising focus.

He said that the investor types targeted by PSP included pension funds, endowments, family offices and sovereign wealth funds.

“We added new material LPs in Canada, the Middle East and Asia, in addition to our core LP base, which has historically been US- and Europe-centric,” said the CEO. “We did what we said we were going to do with respect to Fund IV, and you tend to expect investors to support you when you do that.”

Schwartz declined to identify any institutions by name. However, he did say PSP had secured investments from new investors in China, Japan and the Middle East.

Fund V’s strategy was in many ways a continuation of its predecessors’ approach, said Schwartz, adding that each was guided by an overarching focus on increasing productivity. Another theme focuses on responding to consumers’ growing demand for health- and wellness-focused offerings, he said, through investment in areas such as high-value specialty produce and plant-based proteins.

Schwartz said PSP was focused on buying and operating companies, many of which were family-owned, and transforming them through an operational approach. This includes the flexible deployment of capital, which often allows families to retain material ownership after investment.

About two thirds of investments from Fund V are likely to be in US-headquartered companies, in keeping with PSP’s established approach.

“The reality is that most, if not all, of the companies in which we invest operate globally and a lot of our growth strategies relate to driving business growth internationally,” said Schwartz. “In terms of where we are actually transacting, it’s predominately US with exposure to Europe and Australia.”

He added that although PSP’s investments include companies that hold substantial quantities of agricultural land, the firm’s investors tend to be those that are looking for returns beyond what can be attained through farmland alone.

According to Schwartz, certain pools of institutional capital view PSP as sector-focused private equity, in part because of the firm’s return targets (which he declined to detail). He said endowments and sovereign wealth funds tend to categorize the firm as a specialized real assets investor.

In some instances, he explained, PSP has worked with its LPs to find synergies that allow for incremental exposure to an operating company’s land assets.

“We may decide that to maximize the private equity return, we want to move some of that [portfolio company’s] land off-balance sheet,” he said. “Having close relationships with investors that are already LPs in our funds – that also, outside of what they do with us, invest in land – creates an opportunity for them potentially to invest in that land, outside of what they are already doing with a fund, but where they already know the asset because it’s in our portfolio and they are already invested in it.”

Domestic investors in Fund V include the $152 billion Teacher Retirement System of Texas, the $101 billion Minnesota State Board of Investment and the $14.8 billion Maine Public Employees Retirement System.