Nautic Partners co-founder Rory Smith yesterday became the latest PE pro to throw his hat into the electoral ring, announcing his plans to run for Rhode Island governor. The others are: Steve Pagliuca (Bain Capital – U.S. Senate from Massachusetts); Kip Kirkpatrick (Water Street Healthcare Partners – Illinois treasurer) and Allen Alley (Battery Ventures until 1996 – Oregon governor). The party split is even, as Smith and Alley are Republicans, while Pagliuca and Kirkpatrick are Democrats. [Update: Seems I missed that Kirkpatrick dropped out, saying he underestimated the time demands of being a candidate] I hope to interview each of them within the next week, including a video spot I’m doing tomorrow with Pagliuca. Particularly interested to hear what each of them thinks about the spate of pending legislation and rules changes aimed at private equity and venture capital. Whatever you think of the specific proposals – fund registration, carried interest tax changes, placement agent bans, etc. – it is a bit odd that the PE asset class is getting so much scrutiny without causing any systemic troubles. Not saying that certain changes aren’t positive, but it does seem that you, dear readers, make for a soft target right now.
1 min read · 22 October 2009
You can stop pitching your buyout or venture capital fund to OMERS, because the giant Canadian pension fund is officially not interested. Instead, the C$43 billion system's 40% allocation to "private markets" will be used for direct investments in private equity, venture capital, infrastructure and real estate transactions. This strategy shift has been a popular whisper for months, given that OMERS hasn't actually made a new fund commitment since 2007. But it was not explicitly stated until this past Tuesday and Wednesday at the Quebec City Conference, by both OMERS CEO Michael Nobrega and OMERS Strategic Investments CEO Jacques Demers.
2 min read · 21 October 2009
We all know that Stanford University is trying to sell a bunch of PE/VC positions on the secondary market, but one of its offerings is particularly surprising. Not only is this fund a 2009 commitment (i.e., after liquidity troubles were evident), but it was a tough allocation to get. Can you name it?
1 min read · 21 October 2009
One of my jobs at yesterday's Quebec City Conference was to interview Henry Kravis, following his keynote speech. Plenty friendly (to me), despite his fearsome reputation. Some takeaways: * Kravis might make for a successful politician, at least in terms of the Sunday morning talk show circuit. Whereas some PE bigs provide short, snippy answers, Kravis speaks in chapters. Not intentional filibustering -- I don't think -- but he wants to be thorough. Also able to hear a multi-part question and remember to answer each part (a skill many do not possess). * I asked Kravis to justify the transaction fees, portfolio company monitiroing fees, etc. taken by PE firms like KKR, in line with what we’ve discussed here over the past few months. His response was to tick off a list of services KKR provides portfolio companies, including the number of staffers that each service requires (50 employees at KKR’s portfolio management group Capstone, for example). Quick rebuttal: KKR’s management fees should be able to cover all of those service expenses. It has over $30 billion worth of active funds (I know, a bunch of that is already drawn down), and approximately 400 employees as of its S-1 filing in June 2007. If we assume that KKR is drawing 2% management fees on just half of its fund capital, the math works out to around $750,000 per employee (I know there are lots of other expenses -- office space, benefits, travel, etc. -- but I was low-balling the fund capital). And that does not, of course, include carry, which is what PE pros are supposed to make their fortunes on.
2 min read · 21 October 2009
Drip, drip, drip from CalPERS...
1 min read · 19 October 2009
I moderated a debt markets panel during last week’s Buyouts Texas, and was struck by a comment from Devon Russell, a senior managing director from Madison Capital Funding. He said that while mid-market lenders are slowly increasing their deal volume, they also are shutting out certain equity sponsors who have exhibited bad behavior over the past year. Russell was specifically referring to situation where “everyone knows it’s over,” but the private equity firm nonetheless “stands in the way.” All of the other panelists bobbed their heads in agreement.
1 min read · 19 October 2009
It’s taken a while, but I finally have the opportunity to discuss what the meaning of “is” is. No, not in reference to that, but in reference to the questionable trinity of CalPERS, Alfred Villalobos and Apollo Management. Last week, CalPERS sent over a slew of documents it had compiled on funds that had used Villalobos as a placement agent to successfully secure investments from CalPERS. These documents had been requested by CalPERS of its general partners, as retroactive disclosures that had not been required until just a couple of months ago. Most of the paper I received was about Apollo, which used Villalobos several different times to secure fund commitments from CalPERS – even after CalPERS purchased a piece of Apollo’s management company (a deal aided by Villalobos). What’s clear from these documents is that Villalobos was more a “broker” than a “finder,” in that his compensation was structured as a percentage of CalPERS’ monetary commitment. “Finders” are typically paid a flat referral fee, according to fund formation attorneys I’ve spoken with. It’s a gray area – even after the SEC in April 2008 – but it would be unusual for a knowledgeable firm like Apollo to hire an unregistered individual or firm to serve as a “broker.”
2 min read · 19 October 2009
Big thanks to Dallas’ private equity and (remaining) VC market for coming out to Wednesday night's peHUB Shindig. The event raised around $1,500 in ticket sale proceeds, which will be donated to The Warm Place, a local counseling center for children and teenagers grieving from the death of a friend or family member. Also, a final thanks to sponsors Landmark Partners, New Capital Partners and Staff One. We couldn’t have done it without you. Event photos after the jump...
1 min read · 16 October 2009
What follows are six VC deals culled from recent Regulation D filings with the SEC. None of them has been otherwise disclosed: * Audience Science Inc., a New York-based provider of behaviorally-targeted audience analytics for Web advertising, has secured $15 million of a $20 million round (including $10m of converted promissory notes from 2008). Backers include Mayfield Fund, Mohr Davidow Ventures, Meritech Capital Partners and Integral Capital Partners. Audience Science previously raised over $80 million. www.audiencescience.com * Damballa Inc., an Atlanta-based developer of Internet security software focused on "bot armies," has secured over $8 million of a $9 million funding round. Palomar Ventures was joined by return backers like InterWest Partners and Sigma Partners. The company previously raised $8.5 million. www.damballa.com
2 min read · 16 October 2009
We first reported in August that Sun Capital Partners investors were pushing for a fund size cut, and now the Boca Raton-based firm has acceded. In a letter dated yesterday (and obtained by peHUB), Sun is offering to reduce its $6 billion fifth fund by $1 billion, or down to $5 billion. If not all LPs cut their stakes by 16.7% -- such as Sun employees who might consider personal reductions to be bad form -- then other LPs can reduce by up to around 33 percent. Sun is keeping its 2% management fee intact, and there is no mention of altering the structure whereby the management fee is rolled over into the GP contribution (a bizarre structure that leaves
1 min read · 16 October 2009
