PCG AM’s management to spin out

Mitsubishi Corporation, which has had a 15-year relationship with PCG, is buying out founder Chris Bower’s stake in the private equity consulting business.

Pacific Corporate Group, once a giant among private equity consultants, has been slowly dismantled over the past few years, culminating last year in a major restructuring forced by the firm’s anchor client, the California Public Employees’ Retirement System.

A major piece of the business was PCG’s private equity consulting affiliate PCG Asset Management, which the firm held on to through the restructuring. On Thursday, that final piece also apparently fell away from PCG's control.

PCG AM announced that Mitsubishi Corporation was buying out PCG founder Chris Bower’s 70 percent stake in the business. PCG AM's management team will retain a 30 percent stake in the firm, which will be renamed TorreyCove Capital Partners. TorreyCove will be run by PCG AM chief David Fann.

The deal is not finalised and financial details were not disclosed. PCG and Mitsubishi Corporation, one of Japan’s largest general trading companies, have had a 15-year relationship.

The private equity market is now global requiring scale, resources and presence.

David Fann

TorreyCove will absorb all of PCG AM's employees and continue to focus on private equity advisory work. PCG AM’s existing clients will transition over to the newly branded firm, according to a person with knowledge of the situation.

PCG AM lost several major contracts recently, including with the New York City Teachers’ pension and the Rhode Island state treasury. The firm continues to work with the Illinois Teachers’ Retirement System and the Oregon Public Employees’ Retirement System.

“The private equity market is now global requiring scale, resources and presence,” Fann told Private Equity International in an email. “With this transaction and our partnership with Mitsubishi, we believe that we have the resources and global perspective to take our private equity consulting business to the next level.”

PCG was effectively dismantled last year when CalPERS announced it was severing its more than 20-year relationship with the firm. PCG had started in the private equity consulting business in the 1990s through its initial work with the massive $235 billion pension system.

Even before last year’s dismantling, PCG had already been fractured. In 2007, the business restructured into distinct

Chris Bower

units – PCG the parent company, PCG International and PCG Asset Management.

As part of last year’s reorganisation, PCG International, which made fund investments in non-US funds, fully separated from PCG and spun into a new firm called 57Stars. The 57Stars team manages more than $1 billion for CalPERS in its Global Opportunities Funds I and II.

CalPERS also took away a $480 million clean tech fund that was housed within PCG AM, handing it over to fund of funds Capital Dynamics to manage.

With the Mitsubishi deal, PCG will not fully disappear. The firm continues to “operate some discretionary fund of fund business”, according to a source with knowledge of the situation.