Rosemont Investment Partners, the Pennsylvania-based investor in asset managers, is planning to launch a permanent capital vehicle of at least $200 million by the second quarter of 2018, Private Equity International has learned.
The firm, which has raised three closed-end funds targeting minority equity stakes in other investment management businesses, will scrap the traditional fixed-term fund model, founder Chas Burkhart told PEI. It will instead launch a vehicle of “unconstrained duration” alongside “one or a very small” group of investors.
“Private equity is actually a constraining vehicle in the way it’s typically structured, because it creates misalignment in terms of when you might want to optimally exit your positions,” Burkhart said.
“The new model is just to become more Buffet-esque permanent capital. Duration is not a factor in our thinking.”
Rosemont’s latest private equity fund, a $102 million 2012-vintage, included commitments from Australian superannuation funds, UK family offices and US pensions, and is nearing full deployment.
The firm has made 29 investments since inception, of which 21 have been exited. Its current portfolio of eight US and UK firms has $55 billion assets under management and includes London-based private equity investor Silk Invest and Virginia-based asset manager Wilbanks Smith & Thomas.
Rosemont expects to deploy approximately $300 million-$500 million over the next five years. More than half of its deals are proprietary and management teams are often expected to invest alongside the firm. Returns are generated through a share of current economics, such as cashflow, and the portfolio company’s exit value.
Rosemont does not initiate a sale process unless requested to do so by management, according to Burkhart, with its exit strategy instead divided evenly between sales back to management and third-party sales driven by management.
“[It’s] a challenge when you’re trying to sell a people-run business if those people don’t share similar goals and outcomes,” Burkhart added. “We’ve often had a put structure that allows us to sell our stake back to management. We try to diffuse the whole notion of being at odds with our management teams over selling.”
Rosemont was an early adopter of the increasingly popular funds of firms model. Other examples of permanent capital vehicles in this segment include Blackstone Strategic Capital Holdings, a $3.3 billion 2013-vintage understood to have acquired a minority stake in buyout firm Leonard Green & Partners.