TA takes stake in hedge fund of funds

TA Associates has invested an undisclosed amount for a minority stake in Evanston Capital Management in a deal that includes financing from TA’s subordinated debt fund.

TA Associates has made a minority investment in Evanston Capital Management, a fund of hedge funds manager, representing the thirteenth asset manager the firm has invested in over 22 years.

Financial details of the transaction were not disclosed. The investment came from TA XI, which closed on $4 billion in 2009, as well as TA Atlantic and Pacific VI, the firm’s fund for offshore investors that raised $1.75 billion in 2007. The firm also provided debt financing from its TA Subordinated Debt Fund III, which collected $520 million in 2010.

Evanston, with about $4.2 billion in assets under management across two commingled hedge fund of funds products, was founded in 2002 by David Wagner, former vice president and chief investment officer of Northwestern University.

The deal will not change Evanston’s investment philosophy and strategy, day-to-day operations or personnel, TA said in a statement Tuesday. Wagner will remain chief executive officer of Evanston, and all Evanston principals have entered multi-year contracts, TA said.

TA has invested in numerous asset managers in the past, including Jupiter Fund Management, INVESCO, First Eagle Investment Management, Numeric Investors and Thomson Advisory Group.

“Despite difficulties in the global economy over the past few years, Evanston Capital has had outstanding performance and consistent asset growth since its founding,” said James Hart, a principal at TA who will also join Evanston’s board of managers, in a statement. “The firm’s funds have an attractive investor base of more than 400 investors, as well as relationships with several dozen investment consulting firms, a primary source of new investors in the hedge fund-of-funds industry.”

The Evanston investment was attractive because investors will continue to “allocate more capital to alternatives in general, all kinds of alternatives, and funds of funds will play an important role in that”, Todd Crockett, a managing director at TA, told PEO in an interview.

“Hedge funds took hits in the financial downturn, but performed better than the public markets,” Crockett said.

TA uses capital from its subordinated debt fund in a majority of its deals, Crockett said. “Instead of going out and borrowing senior debt, it allows founders of companies to go to a single source of capital,” he said.

“It’s nice to have one single source of capital.”