How does the Fund work?
Challenge Partners operates under a company structure,
not a partnership. Investors acquire a ‘Seat’ which involves
introducing a loan to the company when they are issued
shares. This loan of $650,000 is returned before dividends
are issued. The Seat entitles them to a share block with voting rights and the number of seats is limited to twenty, ensuring that each Seat remains a substantial portion of the whole (only nine remaining).
The initial loans should be sufficient to fund the first 3-4 purchases; the remainder will be funded out of free cash until the Fund has acquired five core businesses. Cash returns to the Investors commence after approx 12-18 months and will be approx 50% of the free cash available to enable further re-investment.
As a consolidation Fund, the intention is to subsequently acquire further peripheral players, competitors or suppliers of the five core businesses. The end-goal could be an IPO, to remain as an income fund or to sell to institutional investors in the long-run.
Each subsidiary operates entirely independently and transparently. An Independent Director is appointed to each subsidiary and their written reports, the subsidiary’s quarterly financials and any other plans or reports are available to the Investors as a matter of course. This information is provided by email, in hard copy as part of the Investor papers and is always available to Investors through the Login section of this website.
The Fund Managers, being experienced operational Managers, work to a clearly defined set of processes as laid out in CP1002, the Management Document. This is a legal, contractual commitment to provide a specific service which sets the expectations on all sides. Seven key processes – Investor Relationship Management, Acquisition, Investment Management, Investment Optimisation, GM Development, Financial Management and Strategic Research – ensure consistent, transparent accountability at all times.