Debut Water Vehicle Makes Splash

July 14, 2010 Private Equity Insider

XPV Capital is about to finish marketing its debut fund at the vehicle’s $150 million equity limit.

The Toronto firm, which seeks growth-equity investments in water-related businesses, expects to finalize the effort this month. It already has closed on at least $120 million, surpassing its $100 million equity target.

The fund, XPV Water Fund, hit the market in early 2009 and hasn’t used a placement agent. It held a first close in February with $33 million from backers in the U.S., according to an SEC filing, and has also picked up pledges from Canada and Europe. “I think when they started they didn’t expect to raise that kind of money, but it worked out pretty well,” one limited partner said.

The shop’s investment targets include companies that develop technology to address growing scarcity of water, as well as water pollution — particularly those with annual revenues of $5 million to $20 million that are aiming for annual growth of 20-50%.

XPV’s above-target haul, meanwhile, demonstrates increasing demand for highly specialized offerings that can be easily differentiated from other types of vehicles — even when first time managers are involved. The shop is led by managing directors John Coburn, David Henderson and Khalil Maalouf, who have been investing in water-related businesses together since 2006.