Hamilton Lane clients who pay for exposure to private equity will now hear this from the advisory firm: “Would you like any hedge funds with your order?”
The Bala Cynwyd, Pennsylvania firm last month announced an agreement to purchase The Richcourt Group, a manager of co-mingled hedge fund vehicles, for an undisclosed amount. The deal will give Hamilton Lane, which oversees roughly $32 billion (€26 billion) in private equity commitments, a franchise with more than $1.5 billion in hedge funds assets.
Hamilton Lane's John Mensack will serve as the new CEO of Richcourt, which has offices in New York, Paris, Monaco and Zurich. Hamilton Lane chief investment officer Erik Hirsch will sit on the fund of hedge funds' investment committee.
Richcourt was a division of fund administration business The CITCO Group, which had been looking get out of the fund-management business.
Mario Giannini, Hamilton Lane's CEO, says his firm had been scrutinising the hedge fund space for some time as its client base increasingly expressed interest in the asset class. Hedge funds have raised more than $100 billion from investors through the third quarter of 2004, according to Tass Research, making the asset class the most sought-after alternative investment currently.
The bonanza of institutional capital has drawn hedge funds of all stripes to the space, some more experienced than others. Richcourt claims it approves less than five percent of the hedge funds it screens. That nearly matches the disapproval rate of Hamilton Lane, which gets nearly 600 PPMs per year but ends up recommending about 25 of them to clients.
Unlike the private equity scene, an alarming number of new hedge funds are run by traders in their 20s and early 30s who use back-tested (hypothetical) track records to raise money. If these kids think they'll get past the Great Wall of Bala Cynwyd, they've got another thing coming.
NEW JERSEY ENTERS ALTERNATIVES FRAY
The New Jersey state pension has approved a 13 percent allocation to private equity, real estate and hedge funds, opening up a source of capital to alternative investment funds that may be worth $10 billion over five years. The New Jersey Department of the Treasury's division of investment manages some $76 billion (€59 billion) entirely in stocks and bonds. The alternatives allocation is the pension's first. However, a pending lawsuit brought by two labour unions against the state may delay initial commitments. New Jersey's private equity programme is led by Cesar Baez, a former principal at Hicks Muse Tate & Furst hired earlier this year to help the state build out a private funds portfolio.
TA DRAWS $800M FROM NON-US LPS
TA Associates, the Boston growth-equity veteran, has held a final close on TA Atlantic and Pacific V, a side vehicle primarily for non-US investors. It is a successor fund to a similar vehicle raised in 1999 which rounded up $500 million. In 2000, TA raised $2 billion for a growth equity fund called TA IX, and $500 million for a subordinated debt fund. The most recent non-US fund will invest alongside these two primary vehicles. The firm invests roughly $1 billion per year in growing, profitable companies. TA Associates is known for its aggressive programme of “cold-calling” company owners (see Privately Speaking p. 39).
CAISSE SHAKES UP VENTURE STRATEGY
The Caisse de dép^t et placement du Québec, which is the largest institutional fund manager in Canada, plans to outsource the management of its venture capital programme while at the same time increasing its commitments to the asset class. The C$1 billion ($820 million; €640 million) globe-spanning venture capital programme will be managed, in Europe, by Paris-headquartered AXA Private Equity and by Zurichheadquartered SAM Private Equity. In the US, Silicon Valley-based VantagePoint Venture Partners has been awarded a number of mandates and received a C$125 million commitment from the Caisse for a new fund. The Caisse will also commit C$55 million to a new fund to be raised by ProQuest of Princeton, New Jersey. The Canadian institution intends to commit up to C$200 million over the next three years in new funds created by Québec venture firms. The strategy shift follows a review by consultants Ernst & Young.
MATLINPATTERSON CLOSES ON $1.6BN
The New York distressed firm, founded by David Matlin and Mark Patterson, has raised yet another megafund. MatlinPatterson closed its debut fund in 2002 on $2.2 billion. The firm spun out of Credit Suisse First Boston two years ago with a significant amount of capital from CSFB internal funds, partners, and affiliated private banks. Placement agent Atlantic-Pacific Capital, which raised MatlinPatterson's debut fund, was hired for the most recent effort. Fund I has to date returned more than $1.1 billion to its limited partners, a source said. The new fund has a three-year draw-down period and a four-year investment period. It has already invested $300 million.
IGNITION PARTNERS CLOSES $300M THIRD FUND
The Washington-State based firm closed its largest fund to date while simultaneously naming two new partners, John Zagula and Robert Headley. Ignition, which specialises in early-stage information and communications technology, closed its second fund in 2001 on $285 million. Its debut fund, closed in the spring of 2000, totaled $140 million. The Harvard and Stanford University endowments committed to the latest fund. Ignition was founded by executives from Microsoft and McCaw Cellular Communications, now Cingular Wireless. Jonathan Roberts, a partner at the firm, said: “We are completely operating guys. Our past positions of responsibility allow us to be discerning and quite helpful to our portfolio companies.”
KELSO IN $315M ENGINEERING EXIT
The New York buyout firm has agreed to sell its 70 percent stake in Key Components, a maker of custom engineered components, to publicly held global industrial conglomerate Actuant. The deal includes the assumption of $80 million in debt. Key Components, based in Tarrytown, New York, manufactures custom engineered components through two business segments. Kelso's last major exit was in May, when it sold its 50 percent stake in Armkel, the maker of Trojan condoms, to Church & Dwight, a New Jersey-based maker of household products, for $254 million (€214 million). The buyout firm was reported to reap a $137.2 million profit on the deal.
PROVIDENCE, WARBURG FUND BILLION-DOLLAR SOFTWARE DEAL
The two equity houses have agreed to evenly split the equity of Telcordia Technologies in a $1.35 billion leveraged buyout from Science Applications International Corporation (SAIC). If the deal goes through, Providence and Warburg will pay cash for and own equal shares of the Piscataway, New ([A-z]+)-based telecommunications software maker and service provider. Telcordia's clients are IP, fixed-line, wireless and cable companies. The company says its products and services are used by telephone networks handling over 80 percent of US traffic.
ONEX PARTNERS BUYS COSMETICS MANUFACTURER
The Canadian buyout firm has agreed to acquire Cosmetic Essence from Florida's Brockway Moran & Partners in a deal valued at approximately C$300 million ($253 million; €193 million). Onex will invest C$135 million in equity for a 90 percent ownership interest, with senior management and certain institutions holding the remaining 10 percent. Cosmetic Essence, based in New Jersey, is a provider of outsourced supply chain management services to the personal care products industry including formulating, manufacturing, filling, packaging and distribution services.
KKR EXITS CHILD CARE CENTERS FOR $1.04BN
Global buyout house Kohlberg Kravis Roberts is selling its majority stake in KinderCare to daycare center operator Knowledge Learning Corp. for approximately $550 million, including the assumption of approximately $490 million in debt. KinderCare, based in Portland, Oregon, operates more than 1,200 preschool and child-care centers across the US. New York-based KKR originally acquired a majority interest in KinderCare from Oaktree Capital Management in a $570 million leveraged recapitalisation in 1997. The New York firm invested $149 million in the company. Los Angeles-based Oaktree, which retained about a 10 percent stake in the company following the recap, is also selling off its stake in this deal.
JORDAN, KLESCH CLINCH $1.2BN MARITIME DEAL
New York private equity firm The Jordan Company and London-based Gary Klesch have teamed up to acquire TMC, a global maritime container company, from Dutch insurance company Aegon. Aegon bought TMC's parent company Transamerica Financial Corporation in 1999 for £9.7 billion ($18 billion). A source close to the transaction confirmed that Klesch & Co will be a “significant minority shareholder” going forward, with The Jordan Company taking a controlling stake in the business. Reportedly, Jordan and an investor group that includes management will contribute about $200 million in equity and Dutch bank Fortis will provide roughly $1 billion in debt financing. Aegon will provide interim financing of $275 million, repayable within one year of closing of the deal.
HICKS MUSE TO SPEND $405M ON GAS
Dallas-based buyout shop Hicks, Muse, Tate & Furst will acquire Regency Gas Services, a US gas gathering, processing and transmission company. Regency was formed in May 2003 by a group of experienced
PAUL CAPITAL NAMES SENIOR HIRES
Simon Guenzl has joined the New York office of the secondary specialist as a principal. Guenzl will focus on secondary transactions. He most recently spent five years with Sprout Group, the venture arm of Credit Suisse First Boston. Before that, Guenzl worked as an investment banker with Lehman Brothers and then Donaldson Lufkin & Jenrette, which later merged with CSFB. He comes from a legal background in Australia and the UK. In related news, Ann Watson was recently appointed head of deal origination for the secondary private equity team. Based in Toronto and New York, Watson joins the team as a principal with primary responsibility for global sourcing. Watson was a consultant to Paul Capital Partners since 2001, representing the firm in the Canadian market and sourcing secondary acquisitions throughout North America. Prior to joining Paul Capital, she was an investment banker focusing on corporate finance and M&A transactions with UBS Warburg and Prudential Securities. She was also the fund manager for The Brightspark Group of Companies.
HELLMAN HIRES WORLD BANK EXEC
San Francisco-based Hellman & Friedman has brought on Jeffrey Goldstein, former CFO of the World Bank, as managing director. Goldstein is based out of Hellman & Friedman's New York office, where he joins managing directors Frank Zarb and Allen Thorpe. Since 1999, Goldstein had been serving as managing director, chief financial officer and a member of the management committee of the Word Bank, where he was responsible for the management of the institution's internal and external financing affairs. Prior to the World Bank, Goldstein was co-chairman of BT Wolfensohn and a member of the Bankers Trust Company Management Committee. He began his 15 years at Wolfensohn as one of its early partners, during which time he worked closely with Brian Powers and Patrick Healy, who heads Hellman & Friedman's London office.
USVP NAMES GP
Menlo Park-based early-stage venture investor US Venture Partners has hired Chris Rust as general partner. Rust came aboard just days prior to the firm's announcement of the close of its ninth fund on $600 million. Rust will focus on investments in semiconductor, software, systems and subsystems start-ups targeting consumer and networking applications. Prior to USVP, Rust was the president, chief executive officer and co-founder of Mahi Networks for three years, and before that, had spent four years at venture giant Sequoia Capital, including two years as a partner.
THAYER CAPITAL HEAD TO STEP ASIDE
Following a string of investment write-offs, a protracted fundraising campaign and most recently, a scandal involving Connecticut state treasurer Paul Silvester, Thayer Capital Partners' founder Frederic Malek is reportedly handing over the reins of his firm to junior partners. Malek will no longer lead deals or serve as managing partner at Thayer Capital, the firm he started back in 1991, and will change his title to chairman and founder. The firm will most likely be led by partners Jeffrey Goettman, who joined in 1998, Daniel Dickinson, at the firm since 2001, and newest arrival Scott Rued, who arrived early last year.
FLORIDA'S FERNANDEZ LEAVES ALIGNMENT FOR OWN VENTURE
Former senior portfolio manager of the Florida State Board of Administration Frank Fernandez has left his position at Austin, Texas-based consulting firm Alignment Capital after fewer than six months there to start his own consultancy firm, to be based in Austin as well. The firm will offer services to institutional investors looking for advice on investments into private equity funds. Fernandez joined Alignment Capital in June from Florida's pension as a partner and was primarily in charge of client services. He reportedly left the group due to philosophical differences.
HARBOURVEST ANNOUNCES SWATHE OF PROMOTIONS
The Boston-based fund of funds giant has promoted Julie Eiermann, Diane Goodwin and Karin Lagerlund to senior vice presidents. Eiermann joined HarbourVest in 1993 and currently manages the firm's database of partnership information. She also produces partnership performance analysis and manages the partnership performance group. Goodwin has been with HarbourVest since 1995 and overseas the firm's treasury group and runs special projects, including the development of a new investor database. Lagerlund is HarbourVest's controller. She manages the firms accounting and finance teams, running cash distributions and generating financial statements.