http://www.peinsider.com Private Equity Insider en-us Copyright 2000-2007 Harrison Scott Publications. All Rights Reserved. Sat, 31 Jul 2010 06:23:34 -0600 60 http://www.peinsider.com/headlines.php?hid=72290 GTCR Golder Rauner is pitching its newest fund, with a $3 billion equity target. The Chicago buyout firm began distributing official marketing documents for the GTCR 10 vehicle last week, telling investors that 53-year-old chairman Bruce Rauner will play a much-reduced role this time. Rauner, formerly of Bain Capital, has been around since 1981. He became a partner three years later. But investors aren't likely to show much concern about his scaled-back presence. quot;Bruce has been in the business a long time and probably has no desire to be on the road for however long it's going to take to get this fund done,quot; one backer said. quot;Nobody is going to question his decision, or worry that it'll leave a big gap in their coverage.quot; Indeed, GTCR has eight other partners who have been on board at least since the 2006-vintage GTCR 9 began investing. Rauner led that vehicle's marketing campaign, which drew in $2.75 billion. GTCR has earned a loyal investor following by posting a net rate of return of 26 through its various funds, and by offering backer-friendly concessions. For example, the operation passes along to limited partners all transaction fees paid by portfolio companies. Fund 9's marketing effort also saw the shop introduce a management-fee structure in which its industry-standard charge of 1.5 initially is based on all committed capital - but then sees its benchmark drop to 90 of commitments in year seven, followed by declines of five percentage points each year until the vehicle is... http://www.peinsider.com/headlines.php?hid=72177 RoundTable Healthcare is calling the shots when it comes to raising capital. After just a few weeks of marketing, the Lake Forest, Ill., buyout firm held the final close for its RoundTable Healthcare Partners 3 vehicle on July 17 with $600 million. And investors were willing to put up far more for the entity, which pursues buyouts of pharmaceutical, healthcare-distribution and medical-device companies. The shop also raised $200 million for a mezzanine-finance vehicle called RoundTable Healthcare Capital 2. Not only do the results run counter to the experiences of most private equity firms these days, but they come despite an increase in the percentage of profits that Fund 3's limited partners might have to surrender. RoundTable will start by taking its usual 20 of carried interest. But once returns hit two times equity, the carry jumps to 25 - and then 30 if the multiple exceeds 2.7 times. There also is a concession in that the performance fees don't kick in until returns reach 10, as opposed to a more typical hurdle rate of 8. Still, those sorts of charges are practically unheard of in today's market, especially for a buyout shop. In fact, many buyout specialists are moving toward lower fees. And while a few high-flying venture capital firms take a 30 cut of carried interest, a lower charge is typical even in that sector. For RoundTable, the ability to move in the opposite direction with apparent ease testifies to a high level of investor regard. Before it began raising capital, market... http://www.peinsider.com/headlines.php?hid=72064 The Center for Venture Education has named its 2010 class of Kauffman fellows, with a continued focus on creating a positive social impact. The Palo Alto, Calif., organization finalized its selections for the annual Kauffman Fellowship Program over the past week, picking 32 up-and-coming venture capitalists out of a field of some 250 applicants. Of particular interest was choosing individuals with an interest in changing the world for the better by fostering entrepreneurship and building new businesses. For example, Eric Hallstein is serving his apprenticeship at the Omidyar Network, whose investments are geared toward economic, social and political advancement. And Claire Tomkins is with Carbon War Room, a nonprofit organization that researches market-driven ways to address climate change. Participants are also working with government agencies in Mexico, Japan and Singapore. Then, of course, there are the established venture capital investment shops like Atlas Venture, DCM and Panorama Capital. But to some extent, those types of operations are figuring less prominently as the Center for Venture Education's social causes become more of a guiding force for the Kauffman program. The Kauffman Fellowship Program each year pairs aspiring venture capitalists with mentors from firms or organizations where they work or are placed. During the two-year fellowships, the participants attend quarterly classes while aiding in the day-to-day businesses of their hosts - which pay their tuition and... http://www.peinsider.com/headlines.php?hid=71933 Baring Private Equity Asia is marketing its next fund. The Hong Kong growth-equity shop told attendees at its annual meeting in Shanghai three weeks ago that it was almost ready to begin formal pitches, and it now looks like that phase of the effort is imminent. The firm hasn't set an official equity target yet for the vehicle, Baring Asia Private Equity Fund 5, but investors are expecting a goal of $1.75 billion. One limited partner said Baring should be most of the way there by yearend. UBS is serving as placement agent, as it did for the outfit's two previous offerings. Those funds are performing well. For example, Fund 3 was running a rate of return of 68 as of midyear 2009, which ranked fourth among 510 Asia-focused funds tracked by Preqin. That vehicle held its final close with $490 million in 2005. Fund 4 came in 2008 with $1.5 billion. It was 74 invested at the beginning of this year. Baring invests in a range of mid-size companies across Asia, with a focus on paying discounted prices for businesses in China and India with the potential for earnings growth. It sometimes goes after distressed companies in need of restructuring. quot;They actually do pick good investments, they have good purchase-price multiples in their deals . . . and they have a very good team on the ground,quot; one source said. quot;It's not just one home run here. There are a number of good deals in their funds.quot; Baring is headed by chief executive Jean Eric Salata, who founded the operation in 1997 as an arm of London-based... http://www.peinsider.com/headlines.php?hid=71757 Buyout firm RoundTable Healthcare has started talking to would-be limited partners about its next fund, which investors expect to be one of the most sought-after private equity offerings of the year. The vehicle would be the third set up by the Lake Forest, Ill., firm, which is returning to market with plans to raise $600 million to $700 million. Investors are tripping over themselves to gain access. An investor familiar with RoundTable said it has consistently generated profits in the neighborhood of 4-6 times invested cash on its deals. The firm could raise $1.5 billion if it wanted, he said. quot;They're going to be so oversubscribed it's not funny,quot; he added, voicing a sentiment echoed by other market participants. The reason In addition to producing stellar profits, RoundTable is viewed as sticking to its core investment philosophy and not running up fund sizes each time it comes to market. Consider that the shop's first fund from 2001 lined up $400 million of commitments, and since then the firm has raised its targets more modestly than most other fund managers. That restraint is prized by investors. The firm finished marketing its next fund, RoundTable Healthcare Partners 2, with $500 million in 2005. One market player is so devoted to RoundTable that it makes an exception to one of its investment rules only for that firm. The investor typically won't commit capital to a given buyout vehicle unless it's also able to co-invest in deals alongside the fund manager. However, the investor doesn't require that... http://www.peinsider.com/headlines.php?hid=71533 AXA Private Equity wants to syndicate part of the $1.9 billion portfolio of private equity fund stakes it purchased from Bank of America in April. The effort is aimed in part at paring down AXA's share of the package, which was among the largest to trade on the secondary market in recent years. While the exact syndication process is still hazy, it appears AXA is going with a traditional co-investment format in which various players are invited to take part in a deal. Only in this case, it's happening after the initial purchase has already closed. AXA is focusing its pitches on large pension systems and endowments, including those in its own limited-partner base. The firm doesn't plan to take much of a fee on top of what it has already paid for the investments. While unusual, there is some precedent for the scenario. And there are several reasons AXA would want to spread its purchase among other investors. For one, a single-shot deal of that size comes with a lot of risk. And by offering the holdings as co-investments rather than plowing them into a fund with higher fees, the shop stands to generate some goodwill among its backers. There's also the issue of capacity. AXA's most recent secondary vehicle, AXA Secondary Fund 4, has $2.9 billion of equity overall. According to Preqin data, the 2006-vintage entity had a little more than $2 billion of dry powder left when the deal was struck. However, AXA likely didn't have to pay the full amount for the BofA portfolio up front, and could have spread the... http://www.peinsider.com/headlines.php?hid=71360 White Deer Energy will exceed the equity goal for its debut fund. The firm plans to hold the oil-and-gas focused buyout vehicle's final close on June 29, and already has enough commitments lined up for a $780 million haul. With additional investors looking at the offering, it could bring in more than $800 million. White Deer was aiming for $750 million. The Houston firm set that goal in August 2008, and stuck with it even through the worst of the global financial crisis. The timeline for the fund's final close, meanwhile, has been more of a moving target. White Deer and placement agent Credit Suisse had been aiming to wrap up marketing efforts during the first three months of this year after closing on an estimated $630 million by the end of 2009, but opted to campaign for more capital instead. A first close came in July 2009 with $302 million. White Deer's capital-raising abilities largely reflect the strong track records of founders Tom Edelman and Ben Guill. Guill was president of First Reserve until 2007, while Edelman managed a series of energy companies, including Patina Oil amp; Gas. Backers were also encouraged to see Edelman and Guill chip in $100 million of the new fund's capital, placing them among the vehicle's largest investors. TIAA-CREF is contributing another $100 million. The targeted holdings for White Deer's fund include stakes in companies engaged in the exploration or production of oil and natural gas. http://www.peinsider.com/headlines.php?hid=71380 OrbiMed is about to begin marketing a fund that would invest in drug-royalty revenues. The New York shop will seek at least $300 million for the vehicle, OrbiMed Royalty Opportunities Fund, and is assembling a management team specifically for the effort. Greenhill amp; Co. is serving as placement agent. The new fund follows a two-pronged strategy: acquiring the rights to collect royalties via outright purchases of pharmaceutical patents, and writing loans secured by borrowers' patents. The approach could allow OrbiMed to take stakes in a greater range of products than the firm would be able to access under just one of the components. OrbiMed is focusing on drugs that are already in wide use and are producing reliable revenues, as opposed to newer products. That has become a more popular tactic lately, as investors seek to minimize risk and look for plays that aren't correlated to the see-sawing stock market. quot;You've got proven drugs, and obviously you're not dealing with some of the early- to later-stage drug devices or discovery strategies,quot; one source said. A number of drug-royalty funds have been in the market recently. DRI Capital finished shopping its latest vehicle in April, beating its $700 million equity target. Capital Royalty and Cowen Healthcare Royalty are also raising capital. For OrbiMed, drug-royalty investing is a natural move. The $5 billion firm already operates a range of vehicles with healthcare or life-science concentrations, including a line of venture capital funds. The most recent of those entities,... http://www.peinsider.com/headlines.php?hid=71044 Capital Innovations has received about $1 billion of commitments from clients interested in investing in infrastructure projects, and it is now vetting fund managers capable of putting the money to work. The word is that clients have told the Hartland, Wis., firm that they're willing to pledge $800 million to $1.2 billion to what the firm is calling a customized separate account. The plan resembles a fund of funds, except that the commitments are less formal and the money might be used to co-invest alongside fund managers. Capital Innovations is about to solicit information from fund managers interested in investing money on behalf of the planned separate account. The firm wants to assemble a group of funds whose infrastructure investments are diversified by geography and other characteristics. It hopes to include fund operators focused on projects in emerging markets and in the developed world, across an array of industry sectors. The managers could specialize, for example, in infrastructure projects in the transportation, communications, utilities, energy, alternative energy or environmental sectors. Fund managers will have until June 24 to respond to Capital Innovations' quot;request for information.quot; The firm is expected to indicate in its request that it would favor fund managers with creative fee structures. Capital Innovations will consider shops raising money for their first vehicles, and wants the ability to co-invest in deals alongside the managers. It's unclear which investors will be participating in the... http://www.peinsider.com/headlines.php?hid=70841 Pomona Capital has lost two partners. Tom Bradley and Mark Maruszewski quit the New York secondary-market shop on May 18. Expectations are that the duo will now take some time off to consider their next moves, which could be to start a secondary operation either on their own or as part of a larger institution. In the meantime, a buzz has developed around the departures. The day after Bradley and Maruszewski resigned, Pomona sent a letter to investors that downplayed their importance - a tactic some limited partners felt was misleading. Bradley headed the firm's deal-origination efforts. Maruszewski was aiding in those efforts in recent months, while also leading reviews, financing and execution of investments. Both also sat on Pomona's management committee. But sources characterized the pair as working a tier below founder Michael Granoff and his main lieutenants, Steve Futrell and Fran Janis. quot;Tom and Mark had the partner title but they weren't equal partners,quot; said one outsider. Neither Bradley nor Maruszewski was named as a key man on any Pomona funds, with that distinction reserved for Granoff and Janis. Still, they were thought to be comfortable in their positions and their exits took some market players by surprise. Bradley had been on board since 1998, four years after Granoff started the shop. Maruszewski arrived in 2000. There have been conflicting accounts of whether Pomona is seeking replacements. A number of other senior and mid-level staff... http://www.peinsider.com/headlines.php?hid=70479 Eugene Trainor is leaving his post as New Enterprise Associates' chief operating officer to take a similar job at Foundation Capital. Trainor officially exited NEA on Feb. 19, but agreed to continue working with the Menlo Park, Calif., venture capital shop for a few months to assure a smooth handoff. Chief financial officer Tim Schaller and general counsel Louis Citron are absorbing his duties, with no immediate plans to hire a direct replacement. Trainor joined NEA about a decade ago and took over day-to-day responsibility for the firm's non-investment activities with his promotion to head of operations in 2002. He earlier served in a similar capacity at New York asset manager Cramer Rosenthal McGlynn. Foundation, led by founder Bill Elmore, invests mainly in early-stage software, clean-technology and consumer-Internet companies. It has been deploying capital at an increasing pace this year. http://www.peinsider.com/headlines.php?hid=70315 MJX Private Equity is shopping a large chunk of its investment portfolio, in what could amount to a shift in the firm's strategy. The secondary-market offering puts some $200 million of limited-partnership interests in play. It represents a majority of MJX Private Equity's investments in U.S.-focused funds, encompassing commitments to an estimated 20 private equity vehicles that are an average of 80 drawn down. Overall, the portfolio accounts for about half of MJX Private Equity's holdings. Much of the rest is made up of private equity funds in Asia, and the New York operation wants to make those vehicles its core focus going forward. It has already been putting much of its effort into investing in China-focused vehicles on behalf of its clients, who are mainly wealthy individuals and institutions in the U.S. Still, a move by MJX Private Equity to devote so much of its attention to Asia in the near term would mark a turning point for the firm. There's a buzz that the shop could put together a fund of funds that would invest solely in such vehicles. Last year, it was marketing a fund of funds concentrating on media-company pools in India. As for the secondary-market offering, a recent uptick in the values of such portfolios played a role in the timing of the move. Many secondary buyers are willing to pay 20 more than they were last year, thanks in part to soaring net asset values among their targeted funds. Some have boosted their offers by even greater amounts, to levels approaching par. Stock-market gains have also... http://www.peinsider.com/headlines.php?hid=70179 Pegasus Capital has trimmed the capital-raising expectations for its newest buyout fund, while calling off a shift in its investment focus. The moves follow a lukewarm response from potential backers of the vehicle, Pegasus Partners 5. Now the Cos Cob, Conn., firm is telling limited partners that it hopes to raise $1 billion, while characterizing the figure as unofficial and subject to change. When it put the marketing effort in motion in September, Pegasus was aiming for $2 billion. The outfit also said it would shift away from its roots as a special-situations investor, and would instead back healthy companies whose products or services cut business expenses via reduced consumption of energy or other natural resources. While that tactic was already part of Pegasus' repertoire, and even drew encouragement from some prospective limited partners, many existing backers were puzzled by the switch. The upshot: Pegasus is going back to its original strategy, which calls for investments in mid-size businesses that are distressed or undervalued. They could include energy-savings specialists. Among past Pegasus deals that match both descriptions was an investment in mining company Molycorp Minerals, whose products are used in clean-energy production and water treatment. There's also waste-oil recycler Universal Lubricants. In another change for Fund 5, Pegasus has dropped plans to direct up to 10 of the vehicle's equity to an in-house merchant-banking operation that would advise companies with an... http://www.peinsider.com/headlines.php?hid=69881 CDH Investments of Beijing is thinking about going public. The move would make CDH the first private equity manager in China to trade on a public exchange. The firm would probably lean toward the Shanghai Stock Exchange, Shenzhen Stock Exchange or Hong Kong Stock Exchange, although Nasdaq is also a possibility. Apollo Management, Blackstone Group and Kohlberg Kravis Roberts all filed in New York, quot;but CDH is likely to get a much better valuation in China, where it is well known and well respected,quot; one source said. There's no word on how much CDH would seek to raise. The firm's possible plans in part reflect a sense that investors in China are becoming more comfortable with private equity products, along with growing demand among foreign backers. Such an offering would also put cash in the pockets of CDH's owners: New York fund-of-funds manager Capital Z Investment, Singapore's state-owned GIC Special Investments and the shop's own management team. The CDH staff consists of eight professionals led by Stuart Schonberger, Wu Shangzhi and Jiao Zhen. CDH is considered a pioneer in China's private equity market. The firm formed in 2002 as a spinoff from China International Capital, an investment-banking operation that's one-third owned by Morgan Stanley. It then set out on a rapid expansion characterized by widespread capital-raising campaigns - a process that might have given rise to its IPO plans. CDH finished marketing its newest private equity fund earlier this year, collect... http://www.peinsider.com/headlines.php?hid=69713 Buyout shop Greenhill Capital is launching its first fund-raising campaign since beginning its separation from Greenhill amp; Co. The New York operation is expected to set an equity target of $700 million for the vehicle, Greenhill Capital Partners 3. It is currently holding preliminary talks with existing investors, and will likely start a formal marketing effort in the next week or two. Led by Robert H. Niehaus and V. Frank Pottow, Greenhill Capital staged a management buyout in December that gave it the rights to set up future funds on the strength of its prior track record. The group - eventually to be known as GCP Capital - also agreed to continue managing three funds that remain under Greenhill amp; Co.'s control: the two prior Greenhill Capital Partners vehicles and a Europe-focused pool. Greenhill amp; Co., meanwhile, is focusing more heavily on its work as an advisor. Greenhill Capital invests mainly in mid-size companies in the U.S., with an emphasis on energy and financial-services businesses. It typically uses little leverage, which backers might find appealing as ongoing credit-crisis pressures make it difficult for more debt-reliant firms to carry out their deals. Limited partners might also be comforted by the fact that Greenhill Capital, like many firms, is adjusting to a weaker market by resisting the temptation to raise more than it did last time around. The shop finished marketing Greenhill Capital Partners 2 in 2005 with $875 million, beating that vehicle's $700 million equity target. The new... http://www.peinsider.com/headlines.php?hid=70060 (SEE CORRECTION BELOW) Two more executives have split from Ripplewood Holdings, raising further questions about the firm's future. Managing directors Tony Lee and Scott Spielvogel left amicably in the past few weeks to start a New York fund-management shop called One Rock. They're joined by operations specialists from Ripplewood and elsewhere. Lee and Spielvogel focused on chemical, industrial, business-service and telecommunications companies at Ripplewood. One Rock, meanwhile, would take control-oriented positions in ailing companies. The firm is apparently working on a few deals with its own capital, ahead of a fund-raising drive that could come within the next year. The losses of Lee and Spielvogel are the latest in a series of blows for Ripplewood, reinforcing perceptions that the New York firm may not survive much longer. Talk that Ripplewood might be in trouble began to circulate in 2009, when more than a year of fruitless capital-raising efforts prompted the firm to shelve what would have been its newest fund, Ripplewood Holdings 3. Then portfolio company Reader's Digest entered Chapter 11 bankruptcy protection in August. Several staffers left around that time, including Andrew Knight, Michael Koike, Andrew Lack and Anthony Vernon. Talk of internal struggles also surfaced as founder Tim Collins temporarily reduced his role due to health problems. Ripplewood has deployed most of the $1.2 billion that it raised for its second fund, leaving it in desperate need of fresh equity. The firm has... http://www.peinsider.com/headlines.php?hid=69408 Bayside Capital is preparing to wrap up marketing for its latest distressed-asset fund, after just a few months of quiet talks with investors. Sources said the H.I.G. Capital affiliate expects to hit the $1 billion equity limit for its Bayside 3 vehicle by the end of April, amassing all of the capital in a single close. What makes the effort particularly noteworthy is that Bayside has been able to line up investors quickly even though a number of factors should have been working against the firm. For starters, demand for distressed-debt funds in general has been weak. And the offering's January launch came close on the heels of its 2008 predecessor. That helps explain why the new fund's capital-raising capacity is only a third of what Bayside raised for Bayside 2 - technically its debut fund. But the Miami firm still didn't see fit to stage a broad marketing campaign, choosing instead to go with a somewhat covert approach focusing on specific investors. It also stuck with a fee schedule that might have been a turnoff for some backers, taking 2 of committed capital and 20 of earned interest once a hurdle rate of 8 has been achieved. Most distressed-debt shops pocket a 1.5 management fee, if they can get away with even that much. Last month, investors pressured TCW into halving the management fees for its TCW Special Mortgage Credit Funds 1 and 2, to 1, while reducing their performance charges to 5 from 20. Those vehicles invest in devalued mortgage-backed securities. Bayside, on the other hand,... http://www.peinsider.com/headlines.php?hid=69252 Vista Equity is shopping a fund that would pursue small-scale buyouts of technology companies. The San Francisco firm is still in the preliminary phase of marketing the vehicle, Vista Foundation Fund. It is telling investors that it plans to collect $400 million. The early word is that the fund would maintain Vista's focus on technology-company buyouts, while mainly pursuing deals of $25 million to $50 million. Larger investments would be left to the shop's core funds, which have traditionally written checks of $20 million to $200 million - with the capacity for even bigger purchases. The new capital-raising effort appears to reflect a sentiment at Vista that its core funds are missing some opportunities at the smaller end of the market. quot;They feel like with this fund they're going to be able to capture a lot of stuffquot; that was too small for its main vehicles, one source said. Vista's most recent fund, Vista Equity Fund 3, held a final close in 2008 with $1.3 billion. Its second fund came about five years earlier, with $1 billion. It's somewhat unusual for a technology-focused buyout shop to broaden its investment scope to include smaller deals, although there is some precedent for such a move. For example, Silver Lake Partners of Menlo Park, Calif., raised $9.3 billion for its third fund in 2007 while also absorbing the former Shah Capital. The ex-Shah team then collected $1.1 billion for a vehicle called Silver Lake Sumeru that concentrates on mid-size deals - something Silver Lake felt it ... http://www.peinsider.com/headlines.php?hid=69098 Third Rock Ventures is raising capital for its next fund. The Boston firm, which invests in early-stage life-science companies, hopes to collect $400 million to $500 million for its Third Rock Ventures 2. Early indications are that it could reach that range in short order, based partly on prior backing from well-regarded venture capital manager Greylock Partners. Greylock was among investors in Millennium Pharmaceuticals, the drug company where Third Rock founders Mark Levin, Kevin Starr and Robert Tepper worked until setting out on their own in 2007. In an unusual display of confidence, the San Mateo, Calif., shop then supplied a large chunk of capital for the trio's first fund - apparently in exchange for a slice of fees. Greylock's endorsement clearly carried considerable weight with other investors, as Third Rock raised a total of $378 million for the 2007-vintage vehicle. Market players think that cachet will carry over to the new offering as well. Greylock cruised through its latest marketing campaign, beating the $500 million equity target for its Greylock 13 fund by $75 million despite investor concerns about divisions of labor at the firm. As one source put it, Greylock usually has to do little more than send a fax to existing limited partners to raise most of the capital it needs. As for Third Rock, its marketing push has elicited an offbeat response from some backers. That is, they have asked at least two other life-science-focused fund managers for opinions of the shop.... http://www.peinsider.com/headlines.php?hid=68900 The future of AIG's asset-management division has suddenly become a lot cloudier. At issue is a criminal investigation involving Pacific Century leader Richard Li, whose Hong Kong company agreed in September to buy the AIG unit - now called PineBridge Investments. That deal was initially slated to close at yearend, but has been delayed at least twice. Now there are differing accounts about the takeover's prospects. Sources with knowledge of the pact insist it will close soon, saying the investigation of Li isn't relevant. Others concede a brief setback is possible. Meanwhile, nervousness is building among some PineBridge staffers that the sale won't happen at all. Even if the deal does close, the mere fact that PineBridge has ties to Li might give already-cautious investors further cause to distance themselves from the New York operation at a time when it needs to raise capital. It has been almost two years since the shop has set up a private equity vehicle. quot;You have private equity funds that are running out of capital, you have others waiting to get into the market to try to raise capital, but nobody can do anything until the transaction closes,quot; one former employee said. quot;Now people are beginning to think that there's risk that it won't close.quot; Even so, PineBridge is preparing to launch a host of private equity funds once it comes under the Pacific Century banner. They would include the third in a series of funds that invest directly in Asia-based companies, along with a first-time... http://www.peinsider.com/headlines.php?hid=68787 It looks like Blackstone Group is in for another long fund-raising slog. The New York buyout behemoth held a first close for its debut infrastructure fund last week with $200 million, seven months after it began marketing the vehicle. That leaves the firm with a long way to go before it reaches the entity's minimum equity goal of $2 billion, much less its $5 billion limit. The plan is to invest the capital in a range of already-developed infrastructure assets in the U.S. and Western Europe, under the banner Blackstone Infrastructure Partners. Park Hill is serving as placement agent. So why is Blackstone progressing so slowly In general, demand for infrastructure-related vehicles has weakened. While many pension systems and other institutions carved out allocations for such offerings a few years ago in hopes of profiting from a projected surge in development, many reversed those decisions as the economy weakened and their portfolios were thrown out of balance. In addition, limited partners have been reticent to participate in early rounds of fund raising for alternative-investment pools. Blackstone was already well aware of how challenging the marketing environment had become, especially for a player with its appetite for capital. The firm held a final close for its Blackstone Capital Partners 6 buyout fund on January 30 with $10 billion - more than two years after it began pitching the entity and with less than half the equity it originally wanted. Looking forward, one marketing... http://www.peinsider.com/headlines.php?hid=68502 Veronis Suhler Stevenson is losing its investor-relations chief to 3i Group. James Rutherford will join London-based 3i's New York office soon. His first task will be to spearhead marketing efforts for a growth-equity fund that would buy minority stakes in mid-size businesses. In something of a preliminary pitch, 3i told investors last month that it wants to raise amp;163;1 billion ($1.5 billion) for the vehicle. Rutherford assumed his role at Veronis in January 1999, after serving as co-head of a media-focused investment-banking team at J.P. Morgan. Most recently, he was leading efforts to raise $300 million for the New York buyout firm's VSS Structured Capital Fund 2. That mezzanine-finance vehicle hit the market at yearend 2008, and just held a final close above its equity target. Before that, Rutherford presided over a two-year campaign that ended with the 2006 close of Veronis' $1.3 billion VSS Communications Partners 4. quot;Jim Rutherford is one of the best [investor-relations] professionals in the industry and will add a lot to 3i's organization,quot; another firm's marketing chief said. Rutherford's jump to 3i is the second such move to take place in the private equity world in recent weeks. The other saw Advent International pick up Carlyle Group's U.S. investor-relations chief, Robert Brown. Fortress Investment has also been adding to its marketing team (see article on this page). Recruiting professionals say more defections are likely. Some would involve firms that... http://www.peinsider.com/headlines.php?hid=68320 RBS is about to put its entire portfolio of private equity fund interests in play. The holdings total some amp;163;750 million ($1.2 billion), consisting largely of commitments RBS made to fund managers in hopes of winning banking and lending business from their portfolio companies. The institution is now deciding between two finalists to handle brokerage duties, with sources naming Cogent Partners, Credit Suisse and UBS as candidates. A sale would actually mark the delayed finalization of a string of secondary-market sales RBS started in 2007. The bank initially took steps to float the last of those deals in mid-2008, but it doesn't look like the transaction ever went through. The portfolio now on the market may contain the same holdings. The undertaking will have market-wide implications. That's because it would be the first in an expected flurry of large-scale efforts by European banks to shed their on-balance-sheet holdings of stakes in private equity funds - assets they have found unappealing in the aftermath of the global financial crisis. It is estimated that there are about 20 European banks sitting on similar portfolios. They'll be watching closely as they mull exit strategies of their own. quot;It's the first of the big ones to fall, so it's important,quot; one secondary-market broker said. Industry players also want to see if buyers' attitudes have changed since Harvard Management and Stanford Management called off secondary-market sales last year. While Harvard eventually liquidated about... http://www.peinsider.com/headlines.php?hid=68185 A flurry of leveraged-loan refinancings is in the works. Following sporadic refinancing activity in 2009, there are now at least six such arrangements in the near-term pipeline. Each involves a private equity portfolio company that sees an opportunity to lower its borrowing costs or at least buy more time before its obligations come due. The reasons: Credit-market conditions have eased in recent months, while interest rates have remained low. quot;In 2009, financing costs were so high and conditions so bad that many people chose to hold off on refinancing debt,quot; said a loan analyst at Thomson Reuters. quot;Now that we're starting to see the markets open up a bit and appetite increase, we're seeing more issuers lining up deals.quot; J.P. Morgan announced on Feb. 2 that it had arranged one of the upcoming deals: an $800 million syndicated loan that would replace $700 million of buyout debt and some junior obligations attached to Skype Technologies. The buyout debt had financed Silver Lake's November acquisition of a 65 stake in Skype from eBay. Others companies with refinancings set for this month include: Anchor Glass, with three loans totaling $685 million via Credit Suisse. Caris Life Sciences, with a $30 million loan via Bank of America and Wells Fargo. Dole Food, with $850 million of financing via BofA, Deutsche Bank and Wells. Harbor Freight Tools, with $494 million via Credit Suisse. Trident USA Health, with $30 million via GE Capital and Madison Capital. It has been no secret that... http://www.peinsider.com/headlines.php?hid=67975 Troubled Lloyds Banking is trying again to shed a portfolio of private equity holdings that it put on the market last year. The offering, consisting of an estimated $300 million to $400 million of private-company stakes, represents the holdings of a team at Lloyds predecessor Bank of Scotland known as the integrated-finance unit. It hit the market within the past week. For the most part, the effort appears to revive a secondary-direct sale that was in development last May or thereabouts, when Lloyds hired UBS to pitch the integrated-finance division's investments. Little if any of the package sold the first time around, and UBS appears to have again landed the brokerage assignment. Along with the possible sales of a few pieces of the original portfolio, the offering's present size reflects declines in the values of the integrated-finance group's deals. When the holdings started making the rounds last year, the unit had an estimated amp;163;1.3 billion ($2.1 billion) invested in its portfolio companies but had written down those operations by about half - and indications were that a sale would bring in even less. Additional markdowns may have taken place since then. The integrated-finance team followed a strategy similar to that of Bethesda, Md., business-development company American Capital, investing across the capital structure in a range of companies. The Lloyds group stopped making new deals a while ago, but could continue to manage a gradual unwinding of its existing holdings even after a... http://www.peinsider.com/headlines.php?hid=67995 Market advocates are petitioning federal lawmakers to ensure that banks won't be prohibited from investing in private equity funds operating under the U.S. Small Business Administration's Small Business Investment Company program. At issue is a Jan. 21 speech in which President Obama proposed limitations on risk-taking by financial institutions, including rules that would ban banks from running or investing in private equity pools quot;unrelated to serving customers.quot; The next day, the head of a small fund-management shop in the Western U.S. said he got a series of calls from regional banks that had pledged money to an SBIC vehicle he is assembling - saying they had put their commitments on hold. While the manager wished to remain anonymous, his experience is symptomatic of a spreading phenomenon: The effects of the Obama plan, initially focused on big institutions like Goldman Sachs and J.P. Morgan that run large-scale private equity departments, are also being felt by smaller shops outside the banking world. That's especially the case for players that want to tap into the debenture-securities component of SBIC program, as they rely on banks, particularly smaller ones, for an estimated 20 of their capital on average. Some get as much as 40 of their commitments from banks. Industry insiders say about 50 funds are currently seeking capital through the program, with another 100 or so considering such moves or taking preliminary steps. Now lobbying groups are mobilizing on their behalf. Among them is the... http://www.peinsider.com/headlines.php?hid=67603 Macquarie Funds Management has commenced broad marketing efforts for a fund of funds geared toward clean-technology investments. The Sydney-based institution is seeking to raise $600 million for the vehicle, Macquarie Clean Technology Fund 2, and hopes to start with a $100 million first close in March. An internal team is handling marketing efforts at home and in Asia, while AccessAlpha Worldwide of Evanston, Ill., serves as placement agent in North America and First Avenue Partners of London pursues investors in Europe and the Middle East. Macquarie initially planned to bring the offering to market in mid-2009, but held off as investors focused on working through widespread capital constraints. The company then began holding informal talks with existing backers before launching an official marketing campaign this month. The equity target represents a healthy jump from the $205 million Macquarie raised for the first fund in the series. Like that vehicle, which held its final close in late 2007, the new one would direct capital to private equity managers that back companies whose products or services help reduce energy consumption or entail renewable power sources. It would use its larger capital pool to make bigger investments than Fund 1 while maintaining a similar number of positions. Half of the capital would go to buyout or project-finance holdings, with 30 earmarked for growth-capital vehicles. The remaining 20 would involve venture capital funds, mainly with a later-stage orientation.... http://www.peinsider.com/headlines.php?hid=67425 An energy-focused buyout shop is marketing its first fund, with an aggressive equity target. Abatis Capital, whose leaders broke off from the now-dormant AllCapital a little more than a year ago, hopes to raise $1 billion for the vehicle. It would use the money to take equity stakes in power generation and transmission companies. Benedetto, Gartland amp; Co. of New York is serving as placement agent. Abatis is led by Stephen Daniel, Raymond Kwok and Richard Radini, all formerly executives at AllCapital. That New York investment operation had been a unit of Sydney-based Allco Finance, which was forced into receivership in late 2008 due to troubles stemming from the subprime-mortgage crisis. As Allco's assets were liquidated, AllCapital's various personnel detached themselves from the operation and began scouting deals on their own. About a dozen ultimately followed Daniel, Kwok and Radini to Abatis, and the trio brought in some staffers from elsewhere as well. The shop initially received some financial support from Deutsche Bank, perhaps in the form of a credit facility or seed capital that would give the bank a share of profits. While the capital-raising goal for Abatis' fund is high for an inaugural vehicle, especially in today's tough capital-raising climate, market players say the New York firm's leaders boast solid pedigrees that could help attract investors. In addition to his work at AllCapital, for example, Daniel has handled buyout and financing work within Citigroup's investment-banking... http://www.peinsider.com/headlines.php?hid=67623 Two China-focused private equity funds are about to wrap up their marketing efforts, after hitting scaled-backed equity targets. Softbank Asia Infrastructure Fund of Hong Kong is expected to hold the final close for its SAIF Partners 4 in the coming weeks with $1.25 billion. CDH Investments of Beijing would follow soon after with its $1.4 billion CDH China Fund 4. Softbank initially set out to raise $1.5 billion, but cut back after encountering resistance from potential investors. CDH was looking at a $2 billion total. Like their peers around the world, managers in Asia had a tough time raising capital last year. According to Preqin, 118 funds focusing on the region held final closes in 2008, collecting a total of $27.2 billion. In 2007, 261 funds closed on $112.8 billion. That said, demand for China-focused funds has picked up in recent months as some existing vehicles have posted solid performance figures, thanks in part to a general avoidance of leverage. Still, investments in China have a reputation for lacking transparency, which keeps limited-partner interest confined to the best-known managers. Softbank is among the most high-profile private equity players in China. It boasts a solid track record that has helped secure past commitments from investors including Commonfund, Horsley Bridge Partners, J.P. Morgan Investment, Princeton University Investment and Rockefeller Foundation. The firm's 2005-vintage SB Asia Investment Fund 2 was posting a 21.1 rate of... http://www.peinsider.com/headlines.php?hid=67117 Stepstone Group founder Monte Brem is moving to China, where he'll oversee ongoing efforts by the private equity consultant to expand its overseas presence. Brem plans to establish a Beijing outpost for his La Jolla, Calif., outfit early in 2010 and aims to have three or four staffers there by the end of the year. In a precursor to the transfer, he'll be spending a lot more time in Asia beginning Jan. 1. His initial work will focus on drumming up new business while managing existing advisory contracts for two clients outside Asia: AMP Capital and Kuwait Investment Authority. StepStone is also one of several firms that won contracts in 2007 to advise China Investment on specific private equity projects. But the firm hasn't done any work for the giant sovereign wealth fund since 15 months ago - when it became clear that a friendship between Brem and China Investment's private equity director, Li Yingru, had grown more personal. The pair is now planning to get married, which is certainly among the motivations for Brem's move. It also exacerbates potential conflicts of interest that might be resolved only if StepStone walks away from the China Investment contract or if Yingru leaves her post. While impressive on paper, the China Investment mandate has not been particularly lucrative for StepStone. A template for the firm's future business might instead be seen in its work for AMP, Australia's largest mutual fund manager. The Sydney company hired StepStone in January to manage a new program aimed... http://www.peinsider.com/headlines.php?hid=66960 DW Healthcare's capital-raising prospects just got a lot stronger. Following through on a deal it announced last month, Roper Industries said on Dec. 8 that it had completed a $300 million purchase of ultrasound-device maker Verathon from a DW-led buyout group for $300 million. What wasn't said: That price equates to an impressive 51 rate of return. DW bought Verathon in early 2005, with Rho Capital as a co-investor. Now the deal is sure to be featured front and center of the Salt Lake City firm's next fund-raising pitch - which sources peg as likely to start in early 2010 under the banner DW Healthcare Partners 3. Also prominently displayed would be DW's $22 million sale of Global Physics to Landauer in November. DW's ability to hang its hat on some recent exits likely comes as a relief to the firm's leaders, helping to turn some attention away from staffing-related issues that were causing some unease. The capital-raising campaign for the firm's second fund hit a speed bump midway through when co-founder Skip Klintworth called it quits in 2007, saying he wouldn't play any role on the vehicle. While Klintworth wasn't the only quot;key manquot; involved with the fund, investors were unsettled by the move. One big backer, rumored to be a U.K.-based charitable foundation, called off a commitment. Another opted to pass on the offering. Now, with the Verathon and Global Physics deals, DW is hoping it finally has proof that remaining founders Andrew Carragher and Jay Benear constitute a viable investment team. The firm... http://www.peinsider.com/headlines.php?hid=66747 Natixis is looking into the possibility of spinning off some 18 private equity units that together manage an estimated amp;8364;1.5 billion ($2.25 billion) for the bank. The divisions each focus on a different strategy or geographical region. The Paris bank's goal is to find new sponsors, thus allowing it to halt any further support amid a cash shortage. It may also seek to sell some of the groups' existing investments, consisting mainly of direct buyout or growth capital deals. As part of the effort, Natixis has hired Paris mergers-and-acquisitions advisor Oddo amp; Cie to review possible spinoff strategies. The firm, where Natixis chief executive Laurent Mignon worked until taking his current post in April, is expected to issue a formal recommendation in the next month or two. The plan could go into effect soon afterward. A number of options appear to be on the table. The review covers all private equity groups for which Natixis is a sponsor - teams that might also run outside money both within and apart from its Natixis Private Equity division. How they would be offered is undecided, however. Also yet to be spelled out is whether a secondary-market sale would be involved. Some market players believe Natixis is eyeing a big reduction to its private equity exposure, and hopes to unload all but about one-third of the groups' holdings. But others point to obstacles standing in the way of such a deal. For starters, there have been some indications that Natixis would use strong performance figures... http://www.peinsider.com/headlines.php?hid=66541 Kicking off an effort to turn his newly purchased United Investment Managers into a major player in its field, former Aldus Equity partner Marcellus Taylor is developing four new funds of funds. The Chicago outfit just commenced broad marketing efforts for a vehicle called UIM Timber Partners 1 that would invest in timber-related funds, with a $350 million equity target. During the first quarter of next year, it plans to roll out three offerings: one focusing on mezzanine-finance funds and two that would concentrate on newer managers of hedge funds and real estate vehicles. It remains to be seen whether potential limited partners might recoil at any association with the scandal-plagued Aldus - the pension-consulting firm that collapsed after co-founder Saul Meyer was accused earlier this year of participating in an improper pay-to-play arrangement involving New York Common Fund. Of United Investment's planned 2010 launches, the mezzanine-finance fund of funds appears the most advanced. Its capital-raising goal is in the ballpark of $300 million. About half that amount would go directly into mezzanine funds, with the rest set aside for co-investments alongside managers of those entities. The hedge fund and real estate products, meanwhile, are each expected to carry equity targets around $150 million. The offerings reflect a lofty outlook on United Investment's part. Taylor, who is black, eventually hopes to position the firm as the biggest minority-run alternative-investment shop in the U.S. Right now, it r... http://www.peinsider.com/headlines.php?hid=66181 CapStreet Group has set a new timeline to finish marketing its third fund. The Houston buyout firm held a first close for the fund with $80 million in November 2008, which started the clock ticking on a final close that should have come within the following year. But instead, the outfit has secured permission from the vehicle's current investors to keep its marketing efforts going. Now CapStreet is planning to hold a second close by yearend at $100 million. It has also hired placement agent Knight Capital to help top off the fund, which has a $250 million equity target. Knight plans to wrap up fund raising in the first half of 2010. CapStreet started marketing the fund in January 2008. Its lack of progress since holding its first close partly reflects an overall decrease in investor demand for private equity products amid the global financial crisis. The limited partners that have signed on for its fund so far include Guardian Life and Jackson National Life. The effort follows something of a failed experiment with CapStreet's second vehicle. That 2000-vintage entity sought to build on the firm's buyout strategy by incorporating venture capital deals, which were hot at the time. But those plays didn't go well, leading the shop to abandon the venture component and slow down its investment pace in 2003. It eventually parted ways with the staffers responsible for the venture deals. Now CapStreet's marketing pitches are referencing two versions of its second fund's performance, one with the... http://www.peinsider.com/headlines.php?hid=66003 Kohlberg Kravis Roberts and First Reserve won't raise as much as recently projected for their debut infrastructure funds. KKR, which initially set out in mid-2008 to collect $10 billion for its KKR Global Infrastructure Investors and trimmed the vehicle's target to $4 billion by early this year, has reduced its target again. Now the firm is telling investors that it hopes to draw $2 billion to $3 billion. First Reserve, meanwhile, just started formal marketing efforts for its First Reserve Energy Infrastructure Fund with a $1.5 billion goal - well below the $2 billion to $3 billion that industry players were forecasting when word of the effort got out in April. Like a range of funds, both vehicles are the victims of abysmal capital-raising conditions that have persisted for more than a year across the private equity industry. It doesn't help that their sponsors are first-time players in the infrastructure sector, at a time when investors are favoring experienced operators. The first-time stigma is probably more of a hindrance for KKR, as its vehicle represents an effort to diversify away from the firm's core focus on buyouts by taking aim at financing of infrastructure projects. First Reserve's offering, on the other hand, aims to capitalize on the firm's existing expertise as an energy-buyout shop by capturing a mix of infrastructure deals that it finds through its main series of funds - but that don't fit into those vehicles' mandates. The most recent of the Greenwich, Conn., firm's buyout... http://www.peinsider.com/headlines.php?hid=65587 Nogales Investors' limited partners have suddenly found themselves with their hands full, while the Los Angeles private equity shop contends with a management upheaval amid dismal performance. While Nogales Investors has been posting big losses for a while, the backers of the shop's two funds didn't fully spring to action until founder Luis Nogales recently told them that co-head Mark Mickelson was being pushed out. The official line was that split resulted from a refusal by Mickelson to conform to a new deal profile the firm was taking on as part of a turnaround plan. Now certain limited partners are crying foul, claiming that Mickelson was behind some of Nogales Investors' best deals. They also point to a need to bolster the firm's investment staff, which they felt was already a bit thin. Add that to mounting losses, and Nogales Investors' limited partners have found it necessary to keep an eye on the firm by devoting an unusual amount of time to advisory-board calls and meetings. Some even characterize their Nogales holdings as their most labor intensive ever, especially for a case where most of the troubles are perceived to be political. The stepped-up scrutiny comes at a time when Nogales Investors, which mainly pursues expansion-capital positions in mid-size companies, has been struggling to right the ship. The firm's first fund formed in 2001 with $100 million, and went on to post a loss of 33 as of June 30. It is fully deployed. Nogales' second fund held its final close in 2006 with $245 milli... http://www.peinsider.com/headlines.php?hid=65611 Black Diamond Capital Management has halted efforts to assemble an add-on for its latest distressed-debt fund, so it can seek twice as much equity for a stand-alone vehicle. As part of Black Diamond's flagship fund series, the BDCM Opportunity Fund 3 would adhere to the Lake Forest, Ill., firm's strategy of buying defaulted senior-secured corporate debt to gain control of the underlying assets. It has a capital-raising goal of $750 million to $1 billion. The planned vehicle replaces a quot;stub fundquot; that Black Diamond started shopping to existing investors a few months ago with an equity target of $500 million, in hopes of supplementing the buying power of its $983 million BDCM Opportunity Fund 2. The firm never held a close for the add-on. The switch to a new vehicle was apparently driven by a sense that the fund-raising environment is improving, even as distressed-debt opportunities remain appealing. CP Eaton Partners of Rowayton, Conn., is on board as placement agent, after also marketing the stub fund on Black Diamond's behalf. Private equity firms have been assembling add-on funds in increasing numbers this year, as a shortage of investors has made it difficult to put together full-scale vehicles. Many have used the resulting entities to support troubled portfolio companies. Black Diamond, however, was aiming only at new acquisitions The firm's 2006-vintage second fund has put about 60 of its equity to work. Many of the positions it has amassed so far came prior to the onset of the credit... http://www.peinsider.com/headlines.php?hid=65317 Small placement agents may become a thing of the past, as increasing pressure to register their operations forces them to grow or die. At the core of the matter is the New York Common Fund scandal, which has created a growing wariness of placement agents that don't have both a broker-dealer license from the SEC and a registration with the Financial Industry Regulatory Authority. While unlicensed fund-marketing shops have scurried to obtain stronger credentials in response, many are finding the costs to be prohibitive. quot;Legal fees for a basic [broker-dealer] license application are in the $50,000 range,quot; said Eric Wright, co-head of the private-funds group at law firm Ropes amp; Gray. quot;This assumes a typical level of Finra review and doesn't include ongoing costs for compliance and other legal work needed to remain registered.quot; That kind of money won't break the bank for a large placement agent. But it's simply unaffordable for many smaller players or startups, especially those with just a couple of staffers. Market players are forecasting a thinning of the herd as a result, or at least a decline in new players. According to a survey by Private Equity Insider, there are 69 placement agents serving U.S. private equity clients. Only 22 of them have double-digit headcounts. Technically, the Securities Exchange Act of 1934 requires that anyone offering securities transactions must have an SEC broker-dealer license and a Finra registration. But many small placement agents - and individuals working in the business on... http://www.peinsider.com/headlines.php?hid=65629 Stanford Management is shopping the alternative-investment industry's largest secondary-market offering ever. The package, codenamed Project Train, entails some $13 billion that the university endowment originally committed to what it deems illiquid funds - a mix of private equity, energy, timber and real estate vehicles. An estimated $11 billion of that amount remains after distributions and writedowns, about $6 billion of which is drawn down. All told, the offering accounts for nearly all of Stanford's illiquid-fund portfolio. The organization has hired Cogent Partners of Dallas to run the auction, which is still in the early stages of development. Expressions of interest will be accepted through Oct. 27. Cogent is then expected to try to bundle together various combinations of suitors and assets before calling for a round of formal offers. In the end, the offering is almost certain to be carved up among multiple groups of buyers. Just how much of the portfolio will actually change hands, however, is a matter of conjecture. Some sources said that while Stanford wants to field bids on everything in its illiquid-fund portfolio, it's really interested in picking and choosing from offers on particular assets - perhaps unloading a mere $500 million to $1 billion. Another industry player said Stanford is actually floating the $500 million figure to downplay the urgency of its offering, and is instead targeting $2 billion to $2.5 billion. Stanford is also placing a priority on shedding its undrawn commitments,... http://www.peinsider.com/headlines.php?hid=65046 CarVal Investors is about to start marketing a distressed-debt fund with a $2 billion equity target. The vehicle, CVI Credit Value Fund, would purchase portfolios of troubled bonds and loans, and would also take part in debtor-in-possession arrangements and similar plays. Park Hill is on board as placement agent. The offering marks CarVal's first large-scale attempt to assemble a debt fund since 2007, when the Minnetonka, Minn., operation held a final close for its CVI Global Value Fund with $5.75 billion. That easily topped the entity's $3 billion equity target, as investor demand proved far stronger than anticipated. Even though CarVal's goal is lower this time, it is seen by some as ambitious - given widespread capital-raising difficulties among larger private equity funds. There are also a slew of distressed-debt vehicles competing for the attention of limited partners, as managers seek to profit from sagging asset values. CarVal is responding, in part, by setting terms meant to heighten the appeal of its marketing push. For example, CVI Credit Value Fund will charge its 1.25 management fee only on capital that is drawn down and invested - not on committed capital, as was the case with its predecessor. While CarVal will still take its usual 20 share of profits, once an 8 hurdle rate is reached, its management-fee concession is indicative of a new capital-raising reality in which investors have gained the power to demand more-favorable terms. For example, limited partners have increasingly... http://www.peinsider.com/headlines.php?hid=64869 As fund-raising strains increasingly prompt venture capital firms to seek out credit lines, many are finding that lenders want considerable amounts of collateral for what little financing they are willing to supply. Unable to raise fresh equity from their usual investors, venture capital shops lately have been seeking to support their activities with capital from more nontraditional sources. But there has been some sticker shock when it comes to credit lines designed to keep money flowing to portfolio companies, as lenders demand that managers secure the facilities with assets from their most recent funds or fee income from previous vehicles. quot;The GP has to agree to put the debt in front of the assets of the fund, in front of the management fee from the fund - in front of the management fees from the other funds,quot; one Silicon Valley insider said. Even with those protections, lenders are being choosy about which firms they deal with. Those willing to write such quot;specializedquot; credit lines include Silicon Valley Bank and Comerica, which have long extended other types of credit to venture capital shops. Bank of America, Citigroup and Wells Fargo are also entering the mix. All told, the institutions are willing to make an estimated $60 million available across the industry - a pittance considering that there are well over 50 venture capital firms looking for new sources of liquidity. They also generally limit the facilities to amounts equal to 5-10 of the value of a borrower's newest fund. The upshot... http://www.peinsider.com/headlines.php?hid=64742 Banco Santander is scrapping a planned infrastructure fund, after some of its other vehicles were stung by fraudster Bernard Madoff. The Madrid bank had been marketing the Santander Infrastructure Fund 2 since the beginning of this year with a amp;8364;1.5 billion ($2.1 billion) equity target. The plan was for the institution to kick in 20 of the vehicle's overall equity. But Santander began to sour on that contribution, and the fund as a whole, as losses on investments with Bernard L. Madoff Securities ate into its capital base and prompted a re-think of its broader business strategy. A final decision isn't expected until next month, but expectations are that the bank will choose to forgo all direct private equity activities from here on out while sharpening its core focus on retail banking and investment banking. Santander started to get cold feet about its planned contribution to Santander Infrastructure Fund 2 after calculating that the December 2008 blowup of Madoff's hedge fund firm would result in more than $2.3 billion of losses for itself and clients - an amount that placed the bank among Madoff's most heavily exposed investors. It cooled even more after paying $235 million of related settlements to customers in May. By that time, Santander had already lined up amp;8364;500 million of limited-partner commitments for its infrastructure fund. A first close planned for the end of May never took place though, as the bank took stock of its situation. Since then, it has only backed further away. The Madoff... http://www.peinsider.com/headlines.php?hid=64599 Columbia University's endowment is calling off a secondary-market offering of nearly $1 billion, after selling a sliver of the portfolio to Adams Street Partners. The Adams Street sale involved stakes in just three or four private equity funds run by Berkshire Partners and TA Associates - vehicles whose characteristics were on a quot;want listquot; maintained by the Chicago fund-of-funds specialist. While the net asset value of those positions was a mere $10 million or so, they fetched a price approaching 75 cents on the dollar - which looks like a windfall for Columbia compared to the 40-cent offers that many secondary-market buyers are submitting these days. Adams Street's higher-than-usual bids might reflect a situation in which buyers are attempting to overcome long-standing stalemates with sellers by raising their offers for only the most desirable stakes. Everything else gets lowballed or ignored completely. Still, Columbia wasn't satisfied enough with the other prices it was hearing to keep the rest of the portfolio on the market. That said, the sale to Adams Street wasn't the only secondary-market transaction to result from Columbia's offering. The university was able to find buyers for a few other small pieces of the portfolio early this year. But a heavy exposure to venture capital funds with less-desirable traits turned off many potential takers. Columbia started marketing the portfolio late last year, with UBS serving as its advisor. At the time, about $600 million of the positions were... http://www.peinsider.com/headlines.php?hid=64462 A half-dozen Cerberus Capital alumni are seeking commitments for a new turnaround fund. The individuals, who assembled earlier this year under the banner Tenex Capital, are telling prospective investors that they hope to raise $400 million - after mentioning in April that the equity target would be $1 billion. Atlantic-Pacific Capital is on board as placement agent. While Tenex is technically a new shop, the Philadelphia outfit is pitching itself as having formed in 1998. In doing so, it's citing the legacy of founder Michael Green, who sold his TenX Capital to Cerberus in 2003. Green then launched a Cerberus unit, now formally known as Cerberus Operating and Advisory Co., whose staffers serve as advisors and board members for the New York firm's portfolio companies and assist with related investment reviews. In 2005, Green switched to another role at Cerberus, while keeping his title as a managing director and retaining his seat on the New York firm's investment committee. He left last year. Tenex's five other top members, all from Green's portfolio-company operations team, left the distressed-investment giant in 2008 and 2009. They are Varun Bedi, formerly a Cerberus senior vice president, and ex-senior operations leaders J.P. Bretl, Joe Cottone, Helge Jacobsen and Chad Spooner. Each holds the title of managing director at Tenex. Their departures from Cerberus coincided with layoffs that cut the operations group from more than 100 to about 90 in early 2009, largely in response to dwindling deal volume amid the... http://www.peinsider.com/headlines.php?hid=64314 The secondary-market brokerage business is getting increasingly crowded, even as sales remain sluggish. There are now 19 companies serving as intermediaries on offerings of stakes in private equity vehicles or portfolio companies, up from 11 at this point in 2008, according to a survey by Private Equity Insider (see listing on Page 6). Among them are a number of shops that are looking at the secondary market to augment their businesses, while keeping their main focuses on other areas. For example, placement agents have driven much of the field's expansion by re-allocating resources from their core fund-raising divisions, where business has been slow. They now see a greater need among clients to shed illiquid fund stakes, largely in response to widespread cash shortages. Some placement agents have started to set up formal secondary-market advisory practices. They include Park Hill, a San Francisco outfit owned by Blackstone Group. Its secondary team, led by Larry Thuet, formed in Chicago earlier this year. Meanwhile, Jefferies Helix of London has done some secondary work, and Greenhill amp; Co. has added emphasis to the market. Another new player is Houlihan Lokey, which established a secondary-market advisory unit this year under Bear Stearns alumni Jeff Hammer and Paul Sanabria in New York. And MHT Secondary Advisors was launched a few months ago by Dallas investment bank MHT Partners - with market veteran James Lee, formerly of Cogent Partners, at the helm. Elsewhere, firms that have spent a lot of time... http://www.peinsider.com/headlines.php?hid=64144 About two dozen placement agents have teamed up to combat government efforts to bar them from pitching private equity funds to public pension systems. The loosely organized group, calling itself the Coalition of Professional, Registered Placement Agents, has hired lobbying specialist MultiState Associates to assist in its efforts. The firms involved include Atlantic-Pacific Capital, Blackstone Group and C.P. Eaton Partners - with C.P. Eaton founder Charles Eaton playing a leading role. It's possible that not all of the shops are helping to foot the bill. Also opting not to share in expenses are Credit Suisse, Morgan Stanley, Probitas Partners and UBS, which have apparently had some discussions with members of the group. At issue is a cascade of actions flowing from the New York Common Fund scandal, in which two politically-connected individuals - acting as placement agents of sorts - allegedly received kickbacks from private equity firms in exchange for commitments. New York State Attorney General Andrew Cuomo initially called for a nationwide ban that would stop placement firms from offering private equity products to public pension systems. SEC Chairman Mary Schapiro took up the cause last week, announcing that her staff is drafting such rules. At the same time, a number of pension systems have been working on policies that would halt or curtail contact with placement agents - or at least require disclosure of their presence, as is the case with Los Angeles Fire amp; Police (see article... http://www.peinsider.com/headlines.php?hid=64164 Fulfilling predictions that it would pull off one of today's rare marketing successes, Charlesbank Capital's latest buyout fund has attracted more commitments than it can accommodate. The Boston firm sent a letter to investors about a week ago indicating that it had effectively finished raising money for its Charlesbank Equity Partners 7, and would hold a first and final close soon at a self-imposed equity ceiling of $1.5 billion. That amount, which tops Charlesbank's target of $1.25 billion, could have been even higher. To stick to its capital-raising limit, the shop will have to accept less money from some investors than they hoped. Limited partners are waiting for Charlesbank to finalize decisions about whether - and for many, by what degree - to trim their commitments. In some cases, the firm is expected to cap contributions from repeat backers to make room for new ones. The strong demand for Charlesbank's fund is somewhat surprising, given the fact that even the most well-respected private equity firms have had troubled raising money amid the global financial crisis. But industry players were predicting a relatively brisk campaign for the firm, and insiders there said when marketing efforts began in April that they expected demand would exceed the vehicle's capacity. Those projections were based largely on strong returns that Charlesbank has racked up since spinning off from Harvard Management in 1998. The firm started combining Harvard money with contributions from outsiders ... http://www.peinsider.com/headlines.php?hid=67134 The Center for Venture Education has expanded the scope of its Kauffman Fellowship Program to encompass participants in several new countries, and nearly two-dozen new firms. The Palo Alto, Calif., organization finalized selections for its 2009 class of Kauffman fellows in recent days, awarding the coveted assignments to 27 aspiring venture capitalists at 26 hosting firms. It is also launching an initiative called the Society of Kauffman Fellows that would serve as a networking tool for graduates. Of this year's group, nine are working with firms outside the U.S. Among them, five are in places where no Kauffman fellows have been stationed before: Brazil, Colombia, Ireland, Mexico and Palestine. That represents the results of an effort by the Center for Venture Education to give the Kauffman program a more international flavor. Indeed, while the operation usually names a few fellows outside the U.S. each year, it hasn't done so to this extent until now. Last year, for example, there were five non-U.S. fellows from a class of 24. quot;There's a desire to systematically create new companies in all parts of the world, and there's a desire in those countries to tap into Silicon Valley,quot; said Phil Wickham, president of the Center for Venture Education. The field of participating firms is also evolving in another way: Of the 2009 fellowship recipients, 22 are putting in time with shops that haven't previously been Kauffman hosts. The program pairs applicants with mentors for two-year fellowships. The... http://www.peinsider.com/headlines.php?hid=61428 BlackRock has stopped accepting capital for its latest private equity fund of funds, coming up more than 20 short of its $1 billion target due to a weak investment climate and concerns about the stability of its staff. The vehicle, BlackRock Diversified Private Equity Program 4, held a final close on June 30 with $790 million of commitments. Investor appetite for funds of funds in gerneral has waned considerably since BlackRock's investment unit began marketing the fund last year. But at least one institutional investor appears to have pulled a commitment to the vehicle because it was unsure of the cohesiveness of BlackRock's investment team. And a limited partner in prior BlackRock funds of funds declined to participate this time around for a similar reason. quot;There seems to be some turmoil over there as they try to integrate different cultures, and they may lose some good people along the way,quot; said the Blackrock LP. Indeed, the day after he made that comment, BlackRock lost senior executive Kevin Nee, who defected to investment advisory shop Wilshire Associates. Nee was a co-founder of Quellos Private Capital, the fund-of-funds unit that BlackRock bought in 2007 from hedge fund manager Quellos Group. The previous year, BlackRock absorbed Merrill Lynch's fund-management business to create a global investment juggernaut that now oversees $1.3 trillion. At the time, BlackRock chief Larry Fink proclaimed the two operations to be quot;highly complementary, in terms of both expertise and culture.quot; However, sources said... http://www.peinsider.com/headlines.php?hid=63807 Managers of private equity funds are grumbling that investors have been bullying them into signing up for a costly mixer hosted by the Institutional Limited Partners Association. Most of the griping is coming from well-established fund operators. They would rather deal directly with backers than pay the $35,000 registration fee for the annual ILPA GP Summit, but have been given the impression that sitting out the event might damage relationships with those players. The talk comes amid planning for the fourth ILPA GP Summit, scheduled for Nov. 3-4 in New York. The gathering features a speed-dating format of sorts, offering managers the opportunity to sit down for brief meetings with numerous limited partners. With the July 30 registration deadline approaching, general partners say investors are increasingly pressuring them to attend. In part, the buzz reflects just another instance of limited partners exerting more influence over managers. Indeed, in recent months, a sharp downturn in the amount of capital flowing into private equity vehicles has given investors the whip hand. But why are they so eager to promote ILPA's event As members of the trade group, the investors stand to benefit directly from fund operators' registration fees and additional costs those firms can pay to sponsor luncheons or networking events. The ILPA GP Summit is by far the most lucrative of the Toronto-based group's meetings. In fact, the money the summit brings in eventually prompted the organization to position the gather... http://www.peinsider.com/headlines.php?hid=56457 Cerberus Capital is zeroing in on a loss projection for its investment in Chrysler, and it isn't the complete wipeout many have been expecting. Sources close to the matter say the buyout giant and co-investors will likely get back about 25 of what they put into the troubled automaker, thanks mainly to accompanying stakes they took in affiliate Chrysler Financial. Cerberus and as many as 90 other investors paid DaimlerChrysler $7.6 billion for an 80 stake in Chrysler and its legally separate lending arm in May 2007. The firm and its co-investors later picked up the remaining interest at no additional cost. Cerberus' initial contribution was $1.7 billion, which works out to a projected recovery of $425 million. In the eyes of some, that would amount to a coup. As building financial pressures forced Chrysler into Chapter 11 bankruptcy protection on April 30, industry players have been left to speculate about how deep Cerberus' losses would be. Many have pointed toward a near-total loss for the New York firm, which is controlled by Stephen Feinberg. That theory was supported by a June 10 purchase of Chrysler's manufacturing arm by Fiat, with $6.6 billion of financing from the U.S. government. Under the deal, the Turin, Italy, automaker is due to own 20 of a newly reorganized Chrysler. The United Auto Workers' retiree healthcare plan would get 68 of the Auburn Hills, Mich., company, with the U.S. and Canadian governments holding the rest - and no provision for Cerberus. In the meantime, those events have given... http://www.peinsider.com/headlines.php?hid=47965 Fidelity Investments is shutting down its buyout division. The move comes amid a shift in strategy at the mutual fund giant, which is apparently trying to shed some non-core businesses. It is aiming for the end of July to shutter the unit, known as Fidelity Equity Partners. The group was established in early 2007. Its business consists of a single account that has used $500 million of in-house capital to invest in four mid-size portfolio companies in North America and Europe - positions that will now gradually unwind. Although the investments apparently are performing well, Fidelity Equity hasn't seen much deal-making activity lately. In fact, the unit last added to its holdings in March 2008, when it bought regulatory-compliance software maker Complinet Group. Fidelity Equity has 13 investment staffers, all but one of whom will leave with the group's shutdown. Those slated to go are partners Brooke Ablon, Ian Blasco and Gray Hall in Boston; partners Nick Martin and Sebastian McKinlay in London; and seven junior professionals. Blasco was the latest partner to arrive, coming on board a year ago from Bain Capital to cover investments in technology, communications and business-service companies. The only individual set to stay behind is Boston-based partner Rob Ketterson, who also serves as managing partner of Fidelity Equity affiliate Fidelity Ventures. By keeping him in his Fidelity Ventures role, Fidelity is proving wrong some recent chatter that the company was scaling back the grou... http://www.peinsider.com/headlines.php?hid=47984 Struggling GSC Group could end up pledging the contents of its distressed-debt portfolio as collateral for last-gasp financing that would replace a loan it defaulted on last month. The Florham Park, N.J., investment shop has been negotiating with its creditors since the end of April, when it missed a scheduled payment on a $190 million term loan. The talks have stretched beyond the 30 days usually required to work out such problems. GSC has left its fund investors, as well as Moody's and Samp;P, in the dark regarding the progress of the workout negotiations. After the default, the two rating agencies downgraded the loan - which was below investment grade to begin with - and warned that further downgrades would follow if the firm didn't provide them with details of a viable resolution. GSC, with more than $18 billion under management in a slew of investment funds, collateralized debt and collateralize loan obligations, received the loan in January 2006 to fund its planned recapitalization and incorporation. Led by UBS, the facility is secured by a portfolio of collateralized debt obligations whose values have plunged throughout the financial crisis. With the CDO market in shambles, creditors are loathe to invoke their first-lien rights by laying claim to the loan collateral. Instead, efforts are underway to renegotiate the loan. Under any likely workout scenario, GSC would have to put up its performing assets as collateral to win over creditors. While it is primarily a manager of... http://www.peinsider.com/headlines.php?hid=47080 Wayzata Investment has suspended development of its next distressed-debt fund. The Wayzata, Minn., firm informed investors of the decision within the past few weeks, saying that gains on some of its current investments would supply enough capital for the immediate future. Wayzata initially contacted limited partners with plans for the fund in March, indicating that it needed to raise $1.5 billion to exploit an increasing supply of attractive distressed-debt plays. At the time, the firm said that it had already deployed much of the capital from its previous vehicle, a $3.4 billion entity called Wayzata Opportunities Fund 2 that had just held its final close in November. Industry players characterized the sudden reversal as a reflection of continued financial-market volatility, as opposed to indecisiveness on the part of Wayzata. For the most part, the firm is well-regarded, and few see it as prone to rash decisions. But some market participants are still scratching their heads over the shop's about-face. It's possible that Wayzata never envisioned the now-abandoned vehicle as a full-fledged fund, but rather as more of a bridge entity that would allow it to keep investing prior to the eventual launch of the official Wayzata Opportunities Fund 3. quot;They saw great opportunities, the markets rallied, and as a result they were able to turn over toehold positions and create a lot more liquidity,quot; one source said. Either way, Wayzata has plowed through the capital from its latest fund quickly -... http://www.peinsider.com/headlines.php?hid=46957 Kohlberg Kravis Roberts is talking up a cut-rate fee schedule for its maiden infrastructure fund, reinforcing perceptions that the vehicle's year-old marketing drive is in need of a boost. The New York buyout giant placed particular emphasis on the lower-than-usual fees at its annual investor meeting last week, saying it would assess 1 management charge and pocket 10 of profits. Most infrastructure funds come with a management fee of 1.5-2, along with a carry of 20 on returns exceeding an 8 hurdle rate. It's unclear if KKR's fees represent a change from what it was proposing when marketing efforts began, but even investors familiar with its vehicle said they weren't entirely clear on the charges until now. By highlighting the fees for the captive audience at its annual meeting, meanwhile, KKR apparently hoped to lure in limited partners who have so far proven hesitant. The firm initially set a $10 billion equity target for the fund, but had to pull back to $4 billion at the beginning of this year due to weak demand. It didn't mention a target at its meeting, but infrastructure funds are typically larger than comparable buyout vehicles. That said, KKR's fee structure might not be as much of a bargain for limited partners as it may seem. Investors point out that the firm is calculating its management fee against the net asset value of the fund's portfolio, as opposed to the more common tactic of taking a percentage of committed capital. That means shareholders would pay more as holdings rise in... http://www.peinsider.com/headlines.php?hid=45934 Some HRJ Capital investors are trying to negotiate better terms for a planned sale of the fund-of-funds manager to Capital Dynamics, while three former employees sue the embattled firm for unpaid wages. The developments mark just the latest twists in the downfall of HRJ, whose quot;pre-commitmentquot; strategy backfired when it was unable to raise enough money to meet fund pledges and cover debt - leading to its deal with Capital Dynamics. Now some of the Woodside, Calif., firm's backers are trying to delay the Capital Dynamics takeover, as they raise objections over terms they're being asked to approve as part of the general-partnership transfer. The main hangup: a set of stringent indemnity clauses that would effectively bar limited partners from ever suing HRJ, its managers, Capital Dynamics or anyone involved with the firms or their funds for any fiduciary breach. Investors have also taken issue with costs they would have to absorb. It appears the back-and-forth now has Capital Dynamics aiming for a June closing date, moving back from its original target of this month. quot;It's like, 'Indemnify us, cover our transfer expenses, pay our legal fees.' Are you kidding It's just hubris,quot; one market player said. However, there are indications that Capital Dynamics and HRJ are easing some of the language, and have won approval from certain investors as a result. The terms have differing effects on limited partners according to how much of their capital has been drawn down. The employee lawsuits, meanwhile, were filed... http://www.peinsider.com/headlines.php?hid=45071 Two independently run buyout firms whose histories involve Marsh amp; McLennan are pitching offerings of funds designed to invest in financial-services companies. Aquiline Capital and Stone Point Capital began discussing the vehicles with prospective limited partners in the past few weeks. Aquiline hopes to raise $2 billion, while Stone Point is aiming for at least $2.25 billion. Aquiline's offering is the second under its Aquiline Financial Services Fund banner. The New York operation's debut fund held its final close in 2006 with $1.1 billion. Stone Point, meanwhile, is on its fifth entry in its Trident Fund series. It was last in the market about two years ago, raising $2.25 billion. The two firms have a somewhat intertwined past and similar investment strategies, which means they could end up competing for limited partners. Stone Point, of Greenwich, Conn., was owned by Marsh until 2005. At that point, it spun off via a management buyout. Aquiline was started around the same time by Jeffrey Greenberg - a private equity specialist who resigned as Marsh's chairman and chief executive the prior year amid accusations by then-New York State attorney general Eliot Spitzer that the company rigged bids for insurance contracts. Greenberg, who was never charged in the matter, is the son of former AIG chairman Maurice quot;Hankquot; Greenberg. He was joined at Aquiline by co-founder Matthew Grayson, who had earlier helped start Venturion Capital of New York. Like the 15-year-old Stone Point, Aquiline invests in financial-services... http://www.peinsider.com/headlines.php?hid=44949 Draper Fisher Jurvetson has cut the equity target and fees for its newest venture capital fund, in hopes of invigorating the vehicle's marketing drive. The Menlo Park, Calif., firm unveiled the changes in an e-mail to investors last week, telling them that it is now aiming to raise $400 million for its Draper Fisher Jurvetson Fund 10. When the shop began talking to limited partners in September, it said it would look for at least $600 million - while suggesting that the entity's $800 million limit was its actual goal. The fund's performance fees, meanwhile, now feature return benchmarks. Rather than the initially planned 25, DFJ will start by pocketing 20 of carried interest. Once distributions reach 2.5 times investors' equity, the charge will step up incrementally to a maximum of 25. DFJ is also talking about switching how it calculates profits for purposes of determining carry. The idea: to deduct management fees from the capital pool used to calculate profit distributions, which would effectively push down the amount of gains on which to base its performance-fee collections. Such formulations began to become more common a decade ago, when the Internet boom was resulting in massive returns for venture capital shops. Now DFJ's willingness to concede some fees is leading market players to wonder whether a broader move toward investor-friendly terms is in the works. Indeed, DFJ's revised carry resembles an arrangement implemented by Khosla Ventures in its first attempt to raise outside capital.... http://www.peinsider.com/headlines.php?hid=44807 Two endowments have edged out senior private equity professionals in recent weeks - an action many market players once considered unthinkable. Earlier this month, Dumac dismissed Andreas Ritter from his role as head of the Duke University endowment's private equity fund portfolio. A few weeks earlier, University of Virginia amicably parted ways with Sherif Nahas, who as joint head of private placements presided over investments in private equity and quot;real-assetquot; funds alongside Rob Freer. Ritter joined Duke in 2006. While some of his colleagues have come and gone since then, he is the first to be let go. Nahas worked at University of Virginia for about seven years. While the official line from the school is that he quit, industry players say he didn't have a choice in the matter. Sources said neither institution plans to replace the departed staffers. In both cases, the departures apparently illustrate a dim view that endowments in general are taking toward private equity funds after piling into the market in recent years. Nonetheless, the moves surprised industry players, many of whom considered endowment jobs a safe haven amid the financial crisis. Even some of the operations' peers were caught off guard. Portfolio fluctuations may have been a factor. Like many fund backers, asset Duke and University of Virginia have seen their asset-allocation balances disrupted by the so-called denominator effect - in which holdings of private equity fund interests can rise as a proportion of an investor's portfolio... http://www.peinsider.com/headlines.php?hid=29051 A unit of Silicon Valley Bank is looking for ways out of some $200 million of private equity fund commitments, in a replay of a situation that led to the downfall of client HRJ Capital. The Palo Alto, Calif., group, SVB Capital, sees a secondary-market offering as its most likely option and has been showing the package to prospective buyers. But interest so far has been tepid. SVB committed to the funds over the past 18 months under a quot;warehousingquot; strategy, in which it would line up investments and then raise money for a fund of funds to finance those positions - mostly interests in venture capital and growth capital vehicles. But a brutal capital-raising environment, marked by especially weak demand for venture capital funds, kept the fund of funds from even reaching a first close. SVB's parent responded by taking the investments onto its balance sheet, despite the fact that regulatory-capital concerns make it difficult for the institution to keep money in vehicles with the long lockup periods that are typical of private equity funds. In the meantime, Silicon Valley Bank has been meeting capital calls with its own money while continuing to market the fund of funds. It can't keep doing that forever though - hence the secondary-market offering. The bank is facing a major snag as it changes gears: The underlying funds have called down just 20-30 of their commitments, which is too much to assemble a primary-market fund of funds around them, but too little to draw in secondary-market buyers without agreeing to substantial... http://www.peinsider.com/headlines.php?hid=28919 Charlesbank Capital has launched a $1.25 billion capital-raising effort, with a sense of confidence that is rare in today's dreary market. As it began pitching its Charlesbank Equity Partners 7 about two weeks ago, the Boston buyout firm was already telling prospective limited partners that it expected to receive more commitments than it could accommodate. The shop was also asking for expressions of interest, even though it had yet to release formal marketing documents. Those who responded apparently received a private-placement memorandum in recent days. The self-assured marketing approach seems to contradict those of most other private equity firms, as broad cash shortages among investors and diminishing performance prospects combine to create a weak capital-raising environment. But Charlesbank still thinks it can bank on its pedigree, based on ties to Harvard University. Until 1998, Charlesbank was a unit of Harvard Management, which runs the endowment of its namesake institution. Charlesbank then spun off to create an operation that would manage investments for both Harvard and outside investors, and deliver strong returns in the process. The outfit's first four funds, set up under the Harvard Private Capital banner and capitalized solely with Harvard money, put up an average rate of return just below 30. The first Charlesbank fund to mix contributions from Harvard and outsiders, the $590 million Charlesbank Equity Partners 5, was posting a 35 rate of return as of Sept. 30. That vehicle h... http://www.peinsider.com/headlines.php?hid=28802 Bank of New York is handing Siguler Guff oversight of a series of vehicles it recently took over from a joint venture with WestLB. Terms of the deal haven't been disclosed, and it's possible Bank of New York will separately take a stake in New York-based Siguler. What's clear is that Siguler would gain management of three private equity funds of funds through which Bank of New York and WestLB were running $926 million a year ago under the banner of WestLB Mellon Asset Management. That 50/50 joint venture also had $100 million lined up for a fourth fund of funds at yearend 2007. But marketing for the entity eventually stalled, and its ultimate fate remains unclear. A number of staffers have left since then. Those factors might explain why, despite the presence of the WestLB partnership, Bank of New York asset-management president Ron O'Hanley at one point publicly acknowledged that the bank considered private equity funds of funds a void in its product line - something that could be filled by creating ties to Siguler. Bank of New York also announced in February that it would act as a placement agent for Siguler's own products. Siguler manages $7.5 billion overall via funds of funds and direct-investment vehicles. It also runs an advisory business. The WestLB Mellon funds of funds, meanwhile, represent the only U.S. assets of the joint venture. The individual overseeing those vehicles, Ravi Vish, will leave once Siguler steps in. He is looking for a new job. Even before Siguler became involved, changes were... http://www.peinsider.com/headlines.php?hid=28731 One of Apollo Global's buyout funds has found itself holding stakes in so many troubled companies that the firm is assembling a vehicle specifically to buy their debt. Apollo wants to pull together at least $1 billion for the entity, which would seek to prop up businesses in the portfolio of its $10 billion Apollo Investment Fund 6. The Purchase, N.Y., firm would raise some of that money as fresh commitments, while also drawing some unused capital from Fund 6 and asking limited partners in that vehicle to pledge more cash to the new one. The move offers just the latest piece of evidence that Apollo is feeling the sting of a down market. The firm used to be known for generating big returns that created intense demand for its funds, to the point where they were almost impossible for the average investor to access. Its 2001-vintage fifth fund, for instance, was posting a 42.2 rate of return as of Sept. 30. Apollo's fortunes changed with Fund 6. Driven by a booming buyout sector, that 2005-vintage vehicle took in three times as much capital as Fund 5 and adopted an increasingly aggressive acquisition style - only to see the bottom fall out of the market. The fund, now awash with failing companies, was losing 10.7 as of Sept. 30, according to Calpers. The idea behind the new entity is that some of Fund 6's underlying companies might be turned around with additional debt financing. quot;If you've got the capital, you can buy your debt, restructure it voluntarily and leave the company with a much healthier balance sheet,quot; ... http://www.peinsider.com/headlines.php?hid=28628 Houlihan Lokey has hired Bear Stearns Asset Management alumni Jeffrey Hammer and Paul Sanabria to start a secondary-market advisory group. Hammer and Sanabria started at Houlihan Lokey last week. They are now building a team by recruiting outside professionals and by pulling staffers from other areas of the Los Angeles investment-banking firm. The duo's mission is to offer investors options for cashing out of private equity positions early. Those efforts would entail positioning Houlihan as a broker for both secondary-market sales of limited-partnership stakes and secondary-direct sales of private-company interests. It would also put together more complex structured transactions. At Bear, Hammer co-headed a team that managed funds of funds and secondary-market vehicles, while Sanabria headed the failed bank's placement-agent unit with Leo van den Thillart. All three were displaced as J.P. Morgan followed up on its May 2008 purchase of Bear. The arrivals of Hammer and Sanabria at Houlihan represent the culmination of talks that began last year. Initially, Hammer, Sanabria, van den Thillart and former Willis Stein amp; Partners executive Phil Pool were to set up a unit that would handle both secondary-market and placement-agent functions. Hammer and Sanabria were slated to lead the secondary side of the effort, with van den Thillart running the placement business with Pool. Only one side of the effort played out, however, as Pool and van den Thillart started an independent placement agent... http://www.peinsider.com/headlines.php?hid=28644 West Hill Partners has canceled the marketing campaign for its debut fund. The Boston buyout firm made the call within the last few weeks, ending a year-and-a-half of capital-raising efforts that lost traction as industry-wide marketing conditions deteriorated in recent months. While the operation's principals are still considering their next move, signs point toward a shutdown. West Hill had started talking to investors in late 2007, trying to collect at least $500 million for buyouts of mid-size companies with growth potential in the consumer, specialty-retail, business-service and healthcare-service sectors. The firm had been formed just a few months earlier by Dana Schmaltz and Ted Yun, both of whom previously worked as senior partners at Boston buyout shop J.W. Childs. They hired Park Hill of New York as placement agent. Schmaltz and Yun initially managed to line up a few large commitments, to the tune of $120 million, from a group of limited partners that was rumored to include Ontario Municipal Employees. But a portion of the early pledges were contingent on West Hill raising a specific amount of capital, which it failed to do. While that helps explain how the firm's capital-raising efforts fell apart, industry players have differing opinions on why it couldn't gather enough backing in the first place. One market player said the primary culprit was the past year's downturn in the general fund-raising environment, brought on by widespread cash shortages among limi... http://www.peinsider.com/headlines.php?hid=28481 One-time Bear Stearns mergers-and-acquisitions chief Louis Friedman is starting his own private equity firm. Friedman, who most recently served a brief stint at hedge fund manager P. Schoenfeld Asset Management, officially hung out a shingle for his Flexis Capital in January. But he is just now pulling together the staff needed to run the New York operation's first fund. That initial team, which Friedman hopes to assemble quickly, would consist of four individuals tasked with investing in mid-size media, telecommunications and consumer companies in the U.S. and Europe. The word is that Flexis hopes to raise $800 million to $1 billion for its debut vehicle, which it would set up as a so-called pledge fund - meaning investors would be able to choose which deals to participate in. That's a popular format among former investment bankers like Friedman, who ran Bear's global Mamp;A group for eight years until leaving the institution just prior to its failure last year. Friedman then joined P. Schoenfeld, with the mission of starting a private equity operation. His previous employers also include the former Donaldson, Lufkin amp; Jenrette, where he built a mergers-and-acquisitions group focusing on media and communications companies into one of the busiest of its kind. He has also held senior positions on the banking teams at First Boston and Wasserstein Perella. At Flexis, Friedman is targeting investments in companies valued at $25 million to $100 million, with the ability to write bigger checks if limited... http://www.peinsider.com/headlines.php?hid=28329 The private equity industry's troubles are putting the squeeze on recruiting firms. As hiring activity diminishes along with the performance outlooks for buyout and venture capital funds, headhunters' revenues are falling sharply. Making matters worse are declining salaries for private equity professionals - the basis for placement fees. At least two major recruiters, Heidrick amp; Struggles of Chicago and Korn/Ferry International of Los Angeles, have laid off sizable portions of their workforces in recent months. And others are almost sure to follow suit. Nonetheless, executive-search shops haven't been rushing to exit the private equity business, with a survey by Private Equity Insider identifying 55 firms active in the sector - actually up a few from a year ago (see listing on Page 8). In part, those that remain involved are offsetting the decline in assignments from buyout and venture capital clients with mandates from distressed-debt players, where headcounts are on the rise. Distressed-debt specialists need extra hands partly because the types of investments they target have multiplied in recent months. An even greater catalyst in those firm's brainpower requirements is the fact that their positions are converting to equity faster than ever as portfolio companies find themselves unable to pay debt. However, the staffing needs of distressed-debt firms haven't been enough to completely make up for declines in hiring by their buyout and venture capital counterparts. One recruiter said hiring by... http://www.peinsider.com/headlines.php?hid=28342 With its debut fund-raising push falling well short of expectations, investors are questioning whether distressed-debt player Mount Kellett Capital got ahead of itself in building up its operations. The New York firm, founded by former Goldman Sachs investment superstar Mark McGoldrick in 2007, had hit the market in June with the ambitious goal of putting together a $5 billion fund in less than a year. But it has recently fallen behind in pursuit of that target, even after closing on a few rounds of equity. Now the chatter among investors is that Mount Kellett's management-fee income might not comfortably cover its expenses, as the firm had built a hefty staff and infrastructure in anticipation of reaching its goal. At the same time, the fund-raising shortfall prompted the outfit to sell a 20 stake in its business to an unidentified institution for $200 million last year. McGoldrick's team still has to cover ongoing operating costs, though, and it may not be able to continue hiring as planned. Mount Kellett's next move from an operational standpoint could depend largely on where its capital-raising efforts go from here. The firm closed on an initial $1.5 billion in September and has held a few more closes since then - including one last month that left it with an undisclosed sum. Looking forward, the firm has given mixed signals about whether it plans to continue with its aggressive pursuit of investor commitments, hinting that it may pull back with the intent of investing its... http://www.peinsider.com/headlines.php?hid=28245 Growing internal and external pressures may force business-development company Allied Capital to abandon plans for a traditional buyout fund. The Washington operation has yet to hand down an official decision, but is on the verge of canceling the effort, or at least shelving it temporarily, after receiving a tepid response from investors. Allied started marketing the fund about nine months ago with the goal of collecting $750 million to $1 billion. The vehicle would have been the public company's first to employ a private-fund structure for buyout investments, following a few similar efforts in the mezzanine-finance market. Like other business-development companies, Allied invests mainly with capital raised by issuing stock - typically pursuing buyouts of mid-size businesses. A range of factors came into play in derailing the marketing push. In part, investors became wary after the May release of a book, quot;Fooling Some People All of the Time,quot; in which David Einhorn of hedge fund manager Greenlight Capital disclosed that he had been short-selling Allied's stock over a 5-year period while alerting the SEC to what he believed were fraudulent accounting practices by the company. Allied's appeal to investors was further dented by the fact that the firm, while already a sizable backer of private companies, was viewed by many prospective limited partners as a first-time fund operator. At the same time, the values of the shop's existing portfolio companies were plummeting. The... http://www.peinsider.com/headlines.php?hid=28090 Blackstone Group's yearend portfolio valuations will only partially reflect last year's plunging asset values. Under a new accounting rule that requires asset values to be marked to market, Blackstone is employing a methodology that emphasizes potential long-term cash flows, while de-emphasizing recent prices paid for companies similar to those in its portfolio. It's likely that many fund operators will take the same course to avoid substantial markdowns. The stakes are particularly high for Blackstone, since the $116 billion outfit is the only major shop still trying to raise a substantial amount of capital for its latest buyout fund. Blackstone Capital Partners 6 lined up $7.1 billion when it closed on its first round of equity in June - four months behind schedule. Its overall equity goal was then cut by $5 billion, to $15 billion, as investors reduced private equity commitments amid financial-market turmoil. The fund-raising drive could be derailed again if Blackstone takes severe writedowns on assets held by Partners 5, which launched in 2007 with $21.7 billion. Like many fund managers, Blackstone is in the process of finalizing the yearend financial reports it supplies to its investors. The mark-to-market requirement for assigning so-called fair values to assets is mandated under the Financial Accounting Standards Board's FAS 157, which applies to reports filed in fiscal years starting after Nov. 15, 2007. The FASB rule generally requires managers of buyout or venture capital funds to... http://www.peinsider.com/headlines.php?hid=27994 Secondary-market deal volume is expected to continue multiplying this year, as buyers and sellers alike intensify their involvement in the sector. By most projections, $30 billion to $40 billion of private equity fund stakes will change hands on the secondary market this year - roughly double 2008's already heightened activity. It's even possible that 2009 could see trading triple or quadruple, based on inventory held by prospective sellers. A more likely scenario, however, is that the frenzied activity will multiply twofold and then carry into 2010 and possibly 2011. That's partly because a persistent gap between the pricing expectations of buyers and sellers is threatening to keep many deals from materializing until midyear or later. There's also a limit to what buyers can absorb in a single year, even as numerous investment shops set up secondary-market funds (see listing beginning on Page 6). The potential for growth is huge, due to the ongoing credit crisis. Overall, financially strapped sellers remain ready to unload some $80 billion to $100 billion of private equity fund interests as they seek to shed illiquid positions - even after those efforts drove trading to elevated levels last year. A big chunk of the remaining total consists of on-balance-sheet holdings at financial institutions in the U.S. and Europe. They alone have some $30 billion to $40 billion of fund stakes in need of new homes. AIG, for instance, became a visible secondary-market seller in the months following its September collap... http://www.peinsider.com/headlines.php?hid=27714 Citigroup has canceled its annual quot;Private Equity and Alternatives Conference,quot; an exclusive gathering of high-profile players from the private equity world. Market players learned of the decision through an e-mail from Citi on Friday. As recently as a month ago, the bank had stated that it was still planning to hold the invitation-only event. The summit, limited to 400 attendees, had been scheduled for March 30-April 1 at the Ritz-Carlton in Key Biscayne, Fla. Citi plans to resume hosting the conference in 2010. But the bank felt that moving ahead this year would be too ostentatious as it leans on taxpayer-funded government aid to remain afloat through the credit crisis. Indeed, Citi wanted to avoid a public-relations disaster like the one AIG faced last year for spending $443,000 on an executive retreat at the St. Regis Resort in Monarch Beach, Calif. - just days after the troubled insurer received the first installment in what would become a $152 billion bailout package. The risk of a similar story spinning out of control in the mainstream press was simply deemed too high by Citi, given extensive support it has received from the U.S. Treasury Department and Federal Reserve. quot;If word gets out that you had 300 people hanging out at Key Biscayne, that just looks bad,quot; said one would-be attendee, describing an image of highly paid financial professionals living it up at a posh resort on the taxpayers' dime. Similar concerns kept many financial-industry bigwigs from heading to the World Economic Forum's annual... http://www.peinsider.com/headlines.php?hid=27592 Three former Aldus Equity executives, including co-founder Marcellus Taylor, are starting a fund-of-funds shop that would aim to invest with new private equity firms. Joining Taylor in the effort are Kevin Sample and Wayne Greene. They're looking at March to open for business, probably in Dallas. The trio's funds would typically deploy capital to so-called emerging managers that are on their first or second investment vehicles. The outfit would also deal in co-investments and seek to advise pension systems on commitments to emerging managers. Taylor, Sample and Greene exited Aldus at various points over the last year, but Taylor had to wait out a non-compete agreement with the pension advisor before getting the ball rolling on the new shop. Taylor, a partner who helped launch Aldus in 2003, sold his stake in the company a year ago but remained involved until officially resigning last week. He had been in charge of Aldus' emerging-manager program, which includes a fund of funds and a co-investment platform. In that role, he started new-manager investment efforts for such clients as Connecticut Trust Funds, New York Common Fund and Wal-Mart's treasury department. He has also served on the advisory boards of several fund managers, including Pharos Capital of Dallas and Syncom Venture Partners of Silver Spring, Md. In addition, Taylor played a major role in Aldus' fund-selection and due-diligence activities. Sample focused on co-investments as a managing director at Aldus, and worked on Wal-Mart's... http://www.peinsider.com/headlines.php?hid=27458 Each of the private equity industry's five largest fund managers is heading into 2009 with fresh wounds from the financial crisis, underscoring a radically changed market outlook. Blackstone Group ranked as the biggest private equity shop in the U.S. at yearend with $116.3 billion under management in such vehicles, according to Private Equity Insider's Private Equity Directory (see table on Page 6). The buyout goliath's size may be proving a hindrance, however, as it has had to trim the $20 billion equity goal for its latest fund while repeatedly extending its capital-raising timetable. Capital-raising delays were also encountered by number-two Carlyle Group, which manages $91.5 billion. The firm just held the final close for its newest vehicle, falling $1.3 billion short of its $15 billion target. Goldman Sachs is the industry's third largest player, at $87.5 billion. Going forward, the institution may find it more difficult to invest in private companies, after the credit crisis forced it to reorganize as a bank and thus accept heightened government scrutiny. The outlook is also shaky for number-four AIG. The troubled insurer, which averted collapse in September via a bailout from the federal government, has been seeking to sell its private equity operation since then. It is also offering fund stakes on the secondary market. TPG, the fifth biggest player, didn't encounter as much difficulty as its peers as it lined up $19.8 billion for the final close of its TPG Partners 6 in September. But the... http://www.peinsider.com/headlines.php?hid=27324 Embattled fund-of-funds manager HRJ Capital may no longer be able to avoid a seizure of its operations by Silicon Valley Bank. The situation revolves around a $69 million bridge loan that HRJ took out from Silicon Valley last year to help cover a capital-raising shortfall. HRJ is now running out of time to repay that debt, and indications are that the bank could move as soon as this week to take over the outfit as a result. Under that scenario, Silicon Valley would likely integrate HRJ's funds into its own fund-of-funds operation. HRJ borrowed the money from Silicon Valley to temporarily fulfill capital calls from underlying buyout managers while seeking to overome a capital-raising shortfall by its latest fund. The Woodside, Calif., firm has already been working for months to come up with the cash needed to repay the loan. One industry insider said HRJ officials have been quot;all up and down Sand Hill Road looking for all kinds of solutions,quot; referring to the street in Menlo Park, Calif., that many private equity firms call home. For instance, HRJ has looked into trying to raise more money from investors, selling stakes in its management company and offloading positions in its underlying buyout funds to secondary-market players. None of those ideas panned out, however. The secondary-market plan proved particularly unworkable because portfolios of fund stakes are trading at deep discounts amid a crush of supply. Prices are especially depressed on offerings with large undrawn components - the types... http://www.peinsider.com/headlines.php?hid=27336 South Carolina Retirement is seeking to scale back a $750 million commitment to Apollo Management. The pension system officially pledged the capital in July, with plans to spread it across several Apollo-run private equity and debt vehicles. But officials from the two sides never signed documents that would have finalized the deal, as they continued to negotiate certain terms. Now expectations are that South Carolina Retirement's contract with Apollo will be far smaller than initially planned, and that it will likely be in place in the near term. The re-working of the commitment reflects a situation in which South Carolina Retirement - like many other pension systems, foundations and endowments - has become short on cash amid the global financial crisis. Indeed, the organization had some $29 billion last year, but has seen that figure drop by about one-third since then due to losses on a range of holdings. With their assets dwindling, hordes of South Carolina Retirement's peers have sought to raise capital lately by selling illiquid assets such as stakes in private equity funds - often to get off the hook for uncalled commitments or to raise money to fulfill upcoming capital calls. Some have also asked managers not to draw down uncalled commitments. But South Carolina Retirement just began investing in private equity vehicles last year, so its liquidity needs didn't initially appear as urgent. Still, the pension system began seeking ways to reinforce its position after forced payments on synthetic investments ate i... http://www.peinsider.com/headlines.php?hid=26970 Investors in at least one Lehman Brothers private equity fund may seek to walk away from undrawn commitments, as they grow increasingly skittish about the prospects for their holdings. The investor concerns appear to be focused on a unit called Lehman Brothers Merchant Banking, which runs two buyout vehicles. Limited partners formed a committee in the past month or so to discuss whether to honor undrawn commitments to the more recent of those entities, the $3.3 billion Lehman Brothers Merchant Banking 4. That fund, which finished raising capital last year, still hasn't called an estimated $2.6 billion of its pledges. The move comes at a time when Lehman's various private equity units remain in play, following the bankrupt institution's agreement last week to sell its Neuberger Berman unit to the group's own managers. In addition to running buyout funds through Lehman Brothers Merchant Banking, Lehman has been operating venture capital and real estate vehicles through separate arms. The three teams have been working with advisor Lazard to find buyers since Lehman failed in September - separately from efforts to sell Neuberger, the bank's asset-management unit (see The Grapevine on Page 8). Lehman Brothers Merchant Banking's investors, initially described as amenable to any number of options for the operation, may now take a more active role in the unit's ongoing sale process. About two-thirds of LPs must consent to a management change when a buyer for the business emerges, and the LPs appear to be growing more... http://www.peinsider.com/headlines.php?hid=26958 An operation headed by the sharp-elbowed Brad Heppner is accusing former parent Lehman Brothers of ignoring its attempts to buy the bankrupt institution's fund-of-funds business. Heppner's Dallas shop, Crossmark Investment, has had a lawsuit pending in U.S. District Court in Dallas since last month in which it claims it is owed $50 million by Lehman. The initial hope was to recover that money before yesterday, when the U.S. Bankruptcy Court in New York finished taking bids for most of Lehman's broader investment-management division. Heppner asserts that he initially approached Lehman about a deal in which he would forgive the bank's remaining payments if Crossmark was allowed to buy the fund-of-funds operation at a corresponding discount. However, Lehman rebuffed his inquiries, according to Crossmark's court filings, and the offer is now off the table. The firm also claims that the fund-of-funds unit is being sold, as part of the investment-management business, for less than the $100 million it is worth. At issue is Crossmark predecessor Crossroads Group, a fund-of-funds operation that Heppner sold to Lehman in 2003 for $110 million plus up to $58 million of contingent payments. Heppner left Lehman two years later, retaining a major stake in the renamed Crossmark - an entity that exists largely to collect continued payments from the bank. Crossroads' operations, meanwhile, remained as Lehman's sole fund-of-funds group under private-funds chief Anthony Tutrone. The compensation Heppner is now seeking represents... http://www.peinsider.com/headlines.php?hid=28416 Kohlberg Kravis Roberts is in the earliest stages of marketing its next buyout fund. The New York firm has confined talks to just a few loyal investors at this point, as it seeks to gauge interest for its KKR Fund 2009. Those in the know say the operation hasn't set an equity target yet - but expectations are that it will end up with less than the $17.6 billion it raised for the previous entry in its flagship fund series, KKR Fund 2006. quot;They'll be fund raising, no doubt, well into [2009]. I think a lot of what they receive will depend on the underlying market conditions,quot; one market player said. Among the few investors that have heard from KKR so far is Washington State Board, which is set to commit $750 million to the new fund tomorrow. Oregon State Treasury may also be in the mix. Meanwhile, several investors with ties to KKR said they still haven't heard from the firm, which they deemed unusual. The operation has a reputation for barreling into the market with lofty capital-raising targets - and meeting them. The more cautious approach this time around probably reflects the fact that the broader financial crisis has left many investors short on cash. Numerous limited partners have cut back on the amounts of capital that they are willing to dish out for large, illiquid positions as their overall holdings decline in value. The effect has been greatest on large funds, such as entities being marketed by Blackstone Group and Apollo Investment. Still, it makes sense for KKR to seek more capital now, as its... http://www.peinsider.com/headlines.php?hid=26935 ---------- CORRECTION:A Nov. 12 article, quot;PNC, Lincoln Put Investments Up for Grabs,quot; was incorrect. While at least two Pennsylvania financial institutions are shopping private equity fund stakes on the secondary market, neither Lincoln Financial nor PNC Financial is engaged in such talks. The firms haven't retained secondary-market advisors, contrary to what was stated in the article. ---------- PNC Financial and Lincoln Financial are separately pitching portfolios of private equity fund stakes on the secondary market. Pittsburgh-based PNC is seeking a buyer for some $200 million to $300 million of its holdings. Lincoln, a Radnor, Pa., insurer, is putting together a package of no more than $100 million. Both companies have enlisted Cogent Partners of Dallas to market their offerings. The contents of the portfolios remain murky. PNC had roughly $300 million invested in private equity vehicles overall as of yearend 2007, along with $270 million of undrawn commitments. The regional bank also held $264 million of direct interests in private companies. Lincoln's private equity fund deployments make up most of what it defines as quot;other investments.quot; That book totaled $1.1 billion heading into this year. The planned sales coincide with a slew of other secondary-market offerings, many from other financial institutions. Like those shops, PNC and Lincoln are hoping to raise cash largely to tide themselves through tough credit-market... http://www.peinsider.com/headlines.php?hid=26921 Brown University, Calpers and Carnegie Corp. are suddenly finding it hard to meet capital calls from private equity fund managers. The operations are just the latest in a growing set of limited partners to find themselves short on cash amid the financial crisis - and thus are scrambling for ways to make good on undrawn obligations to private equity vehicles. Among those in the same boat: Duke University Management, Stanford Management, University of Chicago and University of Virginia. Some could even be forced to renege on their commitments, which fits in with a buzz last month that limited partners had begun quot;defaulting.quot; Brown, whose $2.3 billion endowment has a 15 allocation for private equity products, is apparently thinking about redeeming capital from hedge funds to raise the money it needs to meet upcoming capital calls from private equity firms. That's similar to a strategy that University of Virginia is employing (see article on Page 4). Calpers, meanwhile, has been negotiating with managers in its portfolio to see if they can hold off on capital calls. While the $190 billion pension system doesn't plan to default on any commitments, it has apparently suggested that in the future it may shun firms that require it to produce cash now. Carnegie, a $3.1 billion charitable foundation, is also in a squeeze. Its managers have been calling on commitments faster than expected, while distributions from older funds have slowed down, creating a cash shortfall. Rumor has it that members of the... http://www.peinsider.com/headlines.php?hid=26909 Duke University's endowment is preparing to offer a massive chunk of its $2 billion-plus private equity portfolio to meet liquidity needs and address its over-allocation to alternative investments. The school's endowment, Duke University Management, has enlisted Dallas advisor Cogent Partners to market a large package of its limited-partner stakes in buyout and venture capital funds. Duke is separately selling off various positions in energy and real estate funds, while redeeming shares in many of its hedge funds. Within the next few weeks, Cogent is expected to start marketing the largest pool, which could contain LP interests amounting to $1 billion to $2 billion of net asset value. At the high end of that range, the offering would appear to encompass nearly all of the university's private equity portfolio. The endowment does not disclose its precise private equity exposure, but as of last year it had around $2.8 billion of alternative investments. Duke is said to have three motives for conducting such a large offering: First, it has been hit hard by a deterioration of its overall investment portfolio, which stood at $6.1 billion in June, leaving the endowment with private equity investments that exceed its allocation target for the asset class. That's partly a function of private equity funds recently accelerating their capital calls, while postponing their payouts. For that reason, a Duke investment official recently contacted at least one of the school's private equity fund managers to ask how much of... http://www.peinsider.com/headlines.php?hid=26898 Cash-squeezed limited partners have begun reneging on their commitments to private equity funds. Attorneys in the private equity arena say there are several examples of recent quot;defaultsquot; by limited partners, but they decline to name names. But Lehman Brothers is known to have failed to make good on one of its pledges since its Sept. 15 bankruptcy filing. And a fund of funds that committed to a small buyout vehicle only a few months ago is now refusing to meet an initial capital call from the manager of that fund. Neither of those two commitments was large enough to force substantive changes in the investment plans of the funds involved, but the defaults could signal a troubling trend. quot;We've seen threats from some very significant players with significant assets under management that are illiquid at the moment, so there's no doubt that there will be a wave of defaults,quot; said the head of fund formation at a large law firm. quot;The question is whether it will be widespread or limited.quot; Several retirement systems, endowments and funds of funds are rumored to want out of the portions of their commitments that have not yet been called. The stock-market meltdown of recent months has left many institutional investors with private equity holdings exceeding their allocations for the asset class. Others are rethinking whether private equity can meet their investment objectives during the current crisis. quot;We've had LPs decide to walk away after they sent in their documents and then asked us not to accept their... http://www.peinsider.com/headlines.php?hid=18943 The professionals overseeing Lehman Brothers' buyout funds are sorting through a complex set of options for the future of the vehicles and their careers. Over the past few weeks, executives of Lehman Brothers Merchant Banking have been shopping their unit to various investment banks that don't already operate buyout funds. That effort came after the management group aborted an attempt to buy the unit from Lehman. The team, headed by managing director Charles Ayers, appears to have backed away from that plan because it couldn't come up with the debt needed to complete such a deal. Also, team members knew their success depended in large part on finding deals through an investment-banking network. The buyout team's course of action contrasts with that of Lehman Brothers Venture Partners, the bank's venture capital team that is expected to continue as an independent firm managing Lehman's three VC funds (see story on this page). The groups managing Lehman's buyout, venture capital and real estate funds opposed the idea of being absorbed by Bain Capital and Hellman amp; Friedman, which this month agreed to pay $2.15 billion for the bulk of Lehman's investment-management division. Like the buyout and venture units, the real estate group is also in talks with prospective buyers. Lehman operates two buyout funds: Lehman Brothers Merchant Banking 3 closed in 2005 with $1.2 billion (of which $300 million was pledged by Lehman) and is now fully invested. Lehman Brothers Merchant Banking 4 closed last year with $3.3... http://www.peinsider.com/headlines.php?hid=26888 At least four major secondary-market investors are in talks to buy Lehman Brothers' $800 million venture capital unit, including its management team. Led by managing director Thomas Banahan, the senior executives of Lehman Brothers Venture Partners pushed last week to spin off the unit into an independent firm that they would run. They opposed selling it to Bain Capital and Hellman amp;amp; Friedman, which last week agreed to pay $2.15 billion for the bulk of Lehman's prized investment-management division, which includes Neuberger Berman. Negotiations are said to be at a late stage, with a deal announcement considered imminent. Coller Capital of London, Goldman Sachs, Lexington Partners of New York and Paul Capital of San Francisco are among the leading players bidding for the right to take over Lehman's general-partnership positions and its stakes in its venture capital funds. Another name bandied about as a possible bidder or bidding partner is AlpInvest Partners of Amsterdam. The negotiations involve the prospective buyers, Banahan's team and U.S. Bankruptcy Court judge James Peck, who presides over Lehman's bankruptcy case, the largest in U.S. history. The VC unit is part of the bankrupt Lehman Brothers Holdings. There are rumors that some firms made offers for the unit even before Lehman's Sept. 15 bankruptcy filing. Lehman's stakes in its VC funds said to amount to $150 million to $160 million. About 15 of the capital in each vehicle typically came from the b... http://www.peinsider.com/headlines.php?hid=18824 Reservoir Capital has lowered by $500 million its fund-raising goal for a still-large vehicle that is unusual in both the way it is structured and the combination of industries it is targeting. The New York firm designed Reservoir Capital Partners to invest mainly in two sectors that, on the surface, seem entirely unrelated: hedge fund managers and power companies. Why pursue investments in two such disparate industries Simply because the $3 billion firm, led by Daniel Stern and Craig Huff, has successful track records in those areas and feels it can produce the best results by pursuing delas in both of its comfort zones. It has seeded New York investment giant Och-Ziff Capital and other successful hedge fund managers, and boasts an accomplished team of power-sector investment professionals. Meanwhile, the fund was set up as a hybrid of sorts. Investors must agree to a 3-year lockup period for some of the capital they commit, and to much longer lockup periods for a few side-pocket companion vehicles that are expected to amount to more than half of the vehicle's total assets. At least half of each limited partner's money must be earmarked for the side pockets, and LPs have the option to allocate up to 90 of their pledges to the longer-term investments. The side pockets will invest purely in buyouts, while the shorter-term component will pursue a mix of deals, including, possibly, investments in hedge funds run by managers that Reservoir previously seeded. At the same time, both the 3-y... http://www.peinsider.com/headlines.php?hid=18759 Wall Street's latest carnage could create a flood of investment opportunities for secondary-market funds, but probably not until late this year. The government rescue of AIG, the failure of Lehman Brothers, Merrill Lynch's agreement to sell itself to Bank of America and troubles facing Goldman Sachs and Morgan Stanley have created a heightened sense of urgency at each of those shops to unload illiquid assets - possibly including stakes in private equity funds. That should mean boom time for secondary-market trades of at least some of those holdings. But any offerings aren't expected to start materializing for a few months. Indeed, none of the institutions has put private equity fund interests up for bid in direct response to their troubles, and that may remain the case as they sift through their portfolios and wait for the underlying managers to mark devalued positions to market at yearend. The thinking behind that approach: Any secondary-market offerings would probably fetch the same prices then as they would now, but the sales would look better because they would take place closer to the vehicles' inevitably reduced net asset values. quot;When you get the actual audited December statements, that will trigger a lot of sales,quot; one secondary-market buyer said. quot;You have to at that point be realistic about the valuations. If you think NAVs are coming down 10 [and] you sell now, it's a 10 discount. At the end of the year, it's an NAV deal, which looks better to people.quot; By all accounts, AIG possesses the... http://www.peinsider.com/headlines.php?hid=18701 Apollo Global has pushed back the final close of its latest fund by about three months, officially placing the firm on an ever-growing list of private equity shops that have seen their capital-raising prospects stall in recent months. The Purchase, N.Y., outfit is now looking at late November or early December to finalize marketing efforts for its Apollo Investment Fund 7, after receiving permission from the distressed-asset vehicle's investors to delay its final close from a projected date in August. Late August would have marked the end of the marketing timeframe the firm's Apollo Management unit set when it began pitching the fund with a $15 billion equity target 12 months earlier. When that point finally rolled around, the firm was just short of its mark - by $500 million or so. Instead of closing the fund shy of its target, Apollo opted to keep its capital-raising window open long enough to scrape up the rest of the commitments. The move confirms rumors that were circulating a few weeks ago, as it became evident that Apollo wouldn't hit its equity goal in time. It also serves as evidence that buyout and venture capital shops aren't the only private equity players to see their capital-raising abilities hampered by a turbulent financial market. Even distressed-asset specialists like Apollo, whose focus would seemingly appeal to investors as more companies run into trouble, are subject to the same forces afflicting other shops. An investment staffer with a large public pension system that committed capital to the new... http://www.peinsider.com/headlines.php?hid=18641 TA Associates is preparing to show investors its latest buyout fund. The Boston firm has indicated to prospective limited partners that it plans to begin an official capital-raising drive for the vehicle, TA Associates 11, within the next few months. It will seek to gather at least $5 billion of commitments. At first glance, the equity target might not appear exorbitant. After all, TA raised $3.5 billion for its previous fund in 2006, and the word at the time was that the outfit could have taken in more than twice that amount from an eager investor audience. But that was before last year's debt market implosion made it harder for buyout firms to borrow capital and raise money from investors. Back then, the market's big players were routinely building up mountains of capital and dispersing it rapidly, buoyed by lush exit prospects and access to credit. Since then, an unfavorable environment has developed even for huge buyout operations that seemed invulnerable in previous years. New York-based Blackstone Group, for instance, has progressed slower than expected with a $20 billion marketing campaign for its sixth fund. Carlyle Group of Washington, meanwhile, was forced to extend the fund-raising schedule for its newest offering until yearend as it hit a few snags while working to reach a $15 billion goal. Madison Dearborn Partners of Chicago also cut $2.5 billion from the amount it is seeking for its latest fund, dropping the size to $7.5 billion. TPG seemed to fare a bit better, as it managed to finish raising... http://www.peinsider.com/headlines.php?hid=18601 One of the better-known Canadian venture capital firms, Ventures West, has discontinued a struggling fund-raising effort and shed some of its junior and mid-level staffers. It decided to suspend its marketing campaign within the past month, when it became clear the $200 million equity target for its ninth fund was well out of reach. Ventures West could have closed on nearly half that amount, but opted instead to shelve the campaign until next year, when it plans to test investor appetite again. The Vancouver firm blamed a number of factors for its failure to gain traction, including a shrinking pool of Canada-based investors willing to make venture capital investments, a choppy environment for exiting investments and the lingering financial crisis that has reduced limited partners' private equity allocations. As part of the move, Ventures West also closed outposts in Montreal and Ottawa, where some of its investment professionals were located. The firm and several of its staffers decided to part ways, with little hope of making many new investments and capital reserves running low. Among those to leave Ventures West were Maha Katabi, a vice president in Montreal who focused on life-science deals, and Robin Axon, a partner who worked in Ottawa, concentrating on communications investments. Axon had been with the firm for seven years, and Katabi for about four years. Also leaving is venture partner Paul Kedrosky, who wasn't a full-time executive with the firm but is well-known in the industry for his... http://www.peinsider.com/headlines.php?hid=18548 With a fund-raising deadline looming, Apollo Management will serve as the latest test of the increasingly difficult conditions faced by buyout firms in marketing mode. Apollo is a week or so from the end of the 12-month timetable it originally set for lining up $15 billion of commitments for Apollo Investment Fund 7. It had locked up just around $12 billion by April, and it's far from clear that a final close will be held on schedule, given the troubles others have experienced in meeting their goals. Apollo could be forced to seek investor approval to extend its capital-raising campaign. Alternatively, it could settle for less by conducting the closing as scheduled. The Los Angeles firm isn't the only one finding it harder to raise money, with pension plans bumping up against their allocation limits, fund distributions slowing and investors worried that deal flow won't return to normal levels until the credit crisis abates. It was just those conditions that forced Washington-based Carlyle Group to seek an extension after it failed to finish its fund-raising efforts by the end of May, the deadline it had specified in its offering documents. Carlyle extended its close to yearend to conduct a final close. Blackstone Group, seeking to attract $20 billion for its sixth buyout vehicle, finally held a first close on that fund last week with $7.1 billion, four months after the date the New York firm originally specified it would do so. Private equity firms typically have 12 months from the date they... http://www.peinsider.com/headlines.php?hid=18502 Growing volume in the private equity arena's secondary market is attracting more players interested in advising on such transactions. The biggest new entrant, Credit Suisse, has quickly gained traction over the past year, and a number of others are exploring the possibility of building platforms for brokering secondary-market deals. The new players are attracted by the increasing volume of secondary-market sales. About $12 billion of secondary deals were completed last year, with brokers playing a role in roughly 70 of those transactions. That's up slightly from 2006, when about 65 of secondary deals were brokered. This year, volume is on track to reach $15 billion to $20 billion, with brokered sales holding steady at 65 to 75. Though new to the market, Credit Suisse has advised on some of the largest deals of the past 12 months. About six years ago, it shut down its secondary-advisory unit. But it re-entered the market last year, at first focusing on mandates that happened to fall into its lap through the bank's vast relationship network. Over the past several months, Credit Suisse has become more aggressive about competing for all sorts of assignments. Meanwhile, Lehman Brothers was rumored earlier this year to be exploring the possibility of entering the secondary advisory business. But its interest appears to have faded as it struggles to weather the current credit crisis. Bank of America and Morgan Stanley, which have handled occasional secondary deals through their merger-and-acquisition departments,... http://www.peinsider.com/headlines.php?hid=18453 Prism VentureWorks is marketing its sixth fund, which could prove a tough sell with investors despite efforts by the firm to address lackluster performance through a change in leadership. The Needham, Mass., venture capital shop, which is seeking to raise at least $275 million, began talking to existing limited partners about the offering a month or two ago and started circulating marketing documents to a broader audience in recent weeks. It hopes to hold a first close in the fourth quarter of this year. However, the effort comes at a time when Prism - like many venture capital firms - can't rely on its track record alone to attract investors amid a generally tough capital-raising environment. In fact, the firm, which invests in life-science and technology companies, has produced disappointing returns through funds assembled over the past decade. Some investors recently said stakes they took in Prism's third fund were among their worst holdings. That 2000-vintage vehicle started with $338 million, beating its $300 million equity target. But its performance lagged as the technology market crashed soon after the final close, and now one limited partner says he ultimately expects to recoup only about 25 cents on the dollar for his contribution. Another source pointed out that Prism's net internal rate of return since just after the 1997 launch of its debut Prism Venture Partners 1 is in break-even territory. The upshot is that new and existing investors aren't likely to give the latest vehicle an enthusiastic... http://www.peinsider.com/headlines.php?hid=18414 Altor Equity is telling investors it wants to extend the life of a buyout fund it began marketing in May, while pocketing an increased share of the vehicle's profits. The manager-friendly terms would apply to the Stockholm outfit's Altor Fund 3, which has so far drawn keen interest from prospective limited partners as it works toward a amp;8364;2 billion ($3.2 billion) equity target. Momument Group is serving as placement agent. Now, part way through the capital-raising effort, Altor's partners have introduced the idea of stretching out the fund's initial life to 13 years, from the standard 10 years or so. They've also begun pushing for an evergreen-like structure that would allow the shop to continue managing the vehicle and its portfolio companies indefinitely by buying out shareholders who don't want to remain on board beyond the 13-year timeframe. Those who do stick around would have the option of reinvesting profits back into the fund. The theory behind the unusual terms, investors said, is to free Altor of deadlines that force many buyout managers to exit positions simply because their funds are maturing - rather than waiting for the best time to cash out. The problem, one pension-system officer said, is presenting incentives for the managers to exit investments when the time is right - as opposed to creating situations in which they want to grab performance fees by cashing out early or collect ongoing management-fee income by sitting on positions. quot;[General partners] don't want to wait forever for... http://www.peinsider.com/headlines.php?hid=18364 The Center for Venture Education has selected 25 aspiring venture capitalists as this year's Kauffman fellows - but the winners of the sought-after apprenticeships aren't the only new faces at the organization. Over the past few months, the Palo Alto, Calif., operation has undergone a change in leadership, with chief executive Patrick Von Bargen leaving to pursue an undisclosed initiative involving U.S. public policy and clean technology. He was replaced by Phil Wickham, a former JAFCO Ventures general partner who comes full circle after being selected as a member of the first Kauffman Fellowship Program class 13 years ago. As is usually the case, the 2008 Kauffman class spans an array of up-and-coming professionals who hope to use the experience as a further springboard into venture capital careers. All told, there are 24 firms participating in the program, in the U.S., the U.K., France, Sweden, Israel and Canada, among a few other locales. Among them, more than 15 are hosting a Kauffman fellow for the first time, including Burrill amp; Co., Essex Woodlands Health, Genesis Partners, Good Energies, L Capital, Panorama Capital and RBC Venture Partners. The fellows, who were named this week, include: Graham Brooks, now an associate at .406 Ventures. He previously led a Bose Corp. team that scouts for technology-company acquisitions. Prasanna Krishnan, an associate at Draper Fisher Jurvetson who last worked on product-development efforts at Microsoft. Sujay Jaswa, who will join New... http://www.peinsider.com/headlines.php?hid=18311 In a clear sign that the fund-raising environment has turned hostile, well-regarded buyout shop Weston Presidio has stopped marketing its latest vehicle. The firm had begun shopping its Weston Presidio 6 fund in May with a $1 billion equity target - the same amount it was able to amass in fewer than three months for its fifth fund in 2005, and $300 million less than it collected for its fourth fund in 2000. Given its modest capital-raising ambitions and its solid reputation, industry participations expected the Boston outfit to be approaching its goal by now. Instead, Weston Presidio is telling investors that it is deferring the marketing push until conditions improve. In the meantime, the outfit plans to invest with some undeployed capital from its prior fund and money it hopes to pick up by exiting investments - which should be enough to tide it over for another six months or so. For outsiders, the change of plans sends a convincing message that even top-shelf managers aren't immune to fund-raising difficulties that have recently taken hold amid a generally dour financial market. quot;I can understand that some shops are going to have a tough time raising money in this environment, but this is a well-respected, brand-name firm with a great investor base that I wouldn't have thought would push back,quot; said one investment advisor. On a broader scale, the troubles are a testament to a squeeze on investors who have received fewer distributions from private equity managers in recent months while watching ... http://www.peinsider.com/headlines.php?hid=18263 Buyout firm Reliant Equity is shutting down what remains of its only fund. The move is the result of a vote within the past few months by a limited-partner advisory board for the vehicle, which has been riddled with losses. Feeling that Chicago-based Reliant wouldn't be able to salvage any value from the portfolio by remaining as manager, those dozen or so shareholders ordered the firm to liquidate the entity's assets as quickly as possible through a secondary-direct offering. While the hope is to recover some portion of the $123 million that investors initially contributed, it doesn't look like the sale will bring in even close to that amount. As of Dec. 31, the fund was running an average annual loss of more than 53, and it has never yielded a single dollar of distributions. What's more, shareholders say that about half of the portfolio has been written down to zero, and that the remaining positions are valued at or below what Reliant paid for them. The upshot is that prospective bidders believe the fund is worth less than $50 million - including a small undrawn component that investors have no interest in fulfilling. Right now, likely bidders consist mainly of secondary-direct funds, which buy portfolio-company stakes from other private equity vehicles. Some are looking at the offering with keen interest, while others are approaching with only passive curiosity. Reliant's limited partners include Calpers, Illinois Public Employees and Illinois State Teachers. Reliant... http://www.peinsider.com/headlines.php?hid=18216 Carlyle Group has resumed marketing its first financial-services buyout fund, having been forced to shelve the effort last year when a co-head of the vehicle left the firm. The Washington investment giant is looking to raise upward of $1 billion for a fund that would focus on buyouts and turnarounds of financial-services companies. Investors said Carlyle plans to target deals similar to those that J.C. Flowers and TPG have been backing. Flowers is doggedly pursuing a amp;163;3.5 billion ($7 billion) takeover bid for U.K. insurer Friends Provident. TPG recently led a $7 billion deal to shore up Washington Mutual, and has been in talks with Merrill Lynch about a capital infusion. Carlyle first started talking to investors about its vehicle last June after it hired co-heads for its financial-institutions group: Edward quot;Nedquot; Kelly, former chief executive officer of Mercantile Bancshares; and David Zweiner, who was chief operating officer of Hartford Financial Services. Kelly quit in January to become president of Citigroup's alternative-investments unit, and Carlyle put its plans on hold. In March, the firm hired Olivier Sarkozy, half-brother of French President Nicolas Sarkozy, to replace Kelly. Sarkozy had been global co-head of the financial-institutions group at UBS. The group employs a third senior professional in managing director Randal Quarles, who was formerly U.S. Treasury undersecretary for domestic finance. It also has access to senior advisors Douglas quot;Sandyquot;... http://www.peinsider.com/headlines.php?hid=18163 Lehman Brothers is moving toward a first close on a fund it will use to buy minority stakes in hedge fund managers. The investment bank aims to raise $3 billion to $5 billion for the vehicle, which it began marketing last month. For several years, Lehman has been using its own capital to pursue the same investment strategy, typically purchasing 20 stakes in large, established hedge fund operators. Its previous investments have included stakes in D.E. Shaw of New York and GLG Partners of London. The approach has so far proven successful for the bank. But this time, it decided to continue the strategy primarily with investor money, rather than tie up its own capital. Still, Lehman is prepared to kick in a chunk of its own money. The bank, which declined to comment, is expected to hold a first close within the next few months. The fund will likely invest in 8-12 different managers across all hedge-fund strategies. It is seen as a logical extension of Lehman's alternative-investment platform, which has $34 billion under management in a wide array of investment strategies, including buyouts, venture capital, real estate, multi-manager, secondary-market investments, co-investments, distressed debt, mezzanine finance and infrastructure. http://www.peinsider.com/headlines.php?hid=18114 Several firms are working to raise a combined total of more than $20 billion for vehicles aimed at an anticipated boom in the secondary market for shares of private equity funds. The secondary market, which got off to a slow start this year, has seen a flurry of activity over the past couple of months. Much of the deal flow has come from cash-strapped investors who, under pressure to rebalance their portfolios, are increasingly willing to sell their stakes in buyout and venture capital funds. Sellers include a slew of financial institutions anxious to get illiquid assets off their balance sheets. Pension plans and endowments are also conducting offerings as they bump up against their private equity allocation ceilings because of a slowdown in distributions from older funds and the sagging stock market, which has shrunk their overall asset size. Other institutions are simply looking to trade their holdings in vintage-2006 and -2007 funds for investments in newer vehicles targeting distressed-asset opportunities. Many such opportunities have already materialized, but the thinking in the secondary market is that most of the bargains will be available from the second half of this year through early next year. That outlook is what has investment firms scrambling to amass hefty war chests. Leading the pack is Goldman Sachs, whose private equity group quietly began marketing its latest secondary-market vehicle two or three months ago and quickly raked in a pile of commitments. The fund is expected to close in the... http://www.peinsider.com/headlines.php?hid=18066 Riverside Co. is lowering some fees on its latest buyout fund after fielding complaints from investors who thought the firm was trying to charge too much. The word comes just a few months after the New York firm notified investors it would charge them slightly more than before to participate in its next vehicle, which is working toward a $900 million fund-raising target. The firm won't reduce its management fee, which it had raised to 2.25 of committed capital, from the standard 2, when it recently began marketing its new Capital Appreciation Fund. Instead, it has agreed to lower the portion of fund profits it claims to 20 from 25, depending on the fund's performance. The firm will still be able to take a 25 carried interest if the new fund returns two times investors' capital - a fairly high hurdle rate. Either way, the new fee structure more or less amounts to giving some ground in the face of investor resistance. quot;I guess it's a material concession. I guess I would agree with that,quot; said one market player who had been apprised of Riverside's plans but wasn't sure they go far enough. Riverside is still finalizing the paperwork it will use to spell out the details of the change for prospective limited partners. One investor said the shop may collect a 25 carry when it begins receiving distributions from portfolio companies in a few years. It could ultimately be required to refund limited partners some of those profits years down the road if it fails to hit the two-times-capital target, in a sort of... http://www.peinsider.com/headlines.php?hid=18015 Citigroup has pulled the plug on a buyout group it set up in July, dismissing all but one member of the unit's investment team and putting its portfolio up for sale. The shutdown of the Citi Venture Capital operation displaced managing partners Tony Bienstock, Alex Coleman and Joe Levy within the past few weeks, along with junior staffers Donald Young, Dale Cheney, Martin McNulty and Jae Kim. That leaves behind only the division's chairman, longtime Citi executive Bill Comfort. Comfort's current capacity at the bank isn't clear. There has been some talk that he may join forces with the recently departed Citi Venture Capital staffers - or perhaps act on his own - to buy the group's $150 million portfolio. But Citi has made it clear that the holdings are its own property, as opposed to the team's, and that it is seeking the best offer it can get for the assets. Those investments consist of stakes in four companies: disposable-dinnerware manufacturer WNA; soft-drink maker Big Red; container company Hoover Materials; and automotive-products manufacturer JAC. They were funded entirely by Citi. The bank's creation of Citi Venture Capital came less than a year after the bank spun off a similar division called CVC Equity in a bid to avoid potential conflicts of interest between its private equity activities and its investment-banking arm. CVC now does business as Court Square Capital (see article on Page 3). Bienstock, Coleman and Levy, meanwhile, came on board from Park Avenue Equity. Their termination is... http://www.peinsider.com/headlines.php?hid=17964 Wachovia is shuttering a fund-of-funds program run by the former A.G. Edwards, which it bought last year. The program, consisting of two vehicles with a combined $230 million operating under the A.G. Edwards Capital banner, appears to be a casualty of a decision by Wachovia to phase out the A.G. Edwards name completely. The plan is for the two funds to gradually shut down. Wachovia still has a team in place to monitor the entities' investments and oversee their unwinding as it liquidates those holdings. Wachovia bought A.G. Edwards for $6.8 billion in October and integrated the St. Louis brokerage house into its own investment-banking unit, Wachovia Securities, in January. A.G. Edwards Capital, the bank's private equity unit, came as part of the package. In a possible indicator of things to come, the managing director in charge of A.G. Edwards Capital, Patricia Dahl, left in February. She has not revealed her next move. Dahl had arrived in 1999 from University of California Regents, where she was an investment officer focusing on private equity funds. Before that, she was a vice president at La Jolla, Calif., pension-system advisor Pacific Corporate Group. A.G. Edwards started marketing its first fund of funds the same year Dahl arrived, under a five-person team she headed. That vehicle held its final close the next year with $139 million. The successor vehicle wrapped up its marketing efforts in late 2001 with just over $90 million. Both have invested in buyout and... http://www.peinsider.com/headlines.php?hid=17915 Morgan Stanley Alternative Investment is gearing up to start its first-ever secondary-market fund. The West Conshohocken, Pa., unit of Morgan Stanley intends to start raising money for the vehicle in the next few months, with a $500 million equity target. While Morgan Stanley hasn't acted until now to start a stand-alone secondary-market fund, it is no stranger to the sector. In fact, the bank's decision to set up the new vehicle was related to a spike in its secondary-market dealings in recent years - investments it had been pursuing through 15 allocations built into a series of primary-market funds of funds it operates. Morgan Stanley has a five-person team focused on the secondary market, and plans to add a few more professionals to that unit this year. Among the recruits would be one senior-level staffer and two or three associates and analysts. The group's most recent additions include director John Costello, who joined early last year after heading a secondary-market program at Susquehanna International of Bala Cynwyd, Pa. That effort is believed to have shut down shortly after his move. Morgan Stanley manages $7 billion through its fund-of-funds program, which includes all of its secondary-market investments thus far. The latest vehicle in that series, its third, launched in June 2006 with $1 billion. In addition to Morgan Stanley's own pickups in the secondary-market business, part of the backdrop for the new fund is a more accommodating environment for buyers in the sector. After wad... http://www.peinsider.com/headlines.php?hid=17877 Golub Capital of New York has revived plans to take itself public, after putting the initiative on ice last year. The debt-focused firm will soon submit offering documents to the SEC, replacing a preliminary filing it made last May. Details of the new undertaking remain foggy, but last time around, the outfit said it would raise as much as $150 million by selling Nasdaq-listed shares under the ticker GCAP, with Wachovia running the books. Some of the proceeds would have partially repaid $300 million of borrowings under a line of credit. A few weeks after Golub filed its initial documents, however, Blackstone Group raised $4.8 billion in one of the highest-profile IPOs in years - only to see its share price plummet in the months that followed. Many other financial-industry players also suffered the same fate, reflecting a confluence of pressures that included worries brought on as the subprime-mortgage crisis mushroomed into a global credit crunch. At the same time, values plummeted among Golub's typical investments, including subordinate debt and second-lien senior debt, as well as preferred and common equity supporting buyouts and recapitalizations. That, in turn, made it tough to nail down an appropriate share price for the firm. Golub responded by shelving its IPO in October. In the meantime, it went about investing a $400 million pool of capital it had just raised for its Golub Capital Partners Opportunistic Fund. That vehicle was designed to exploit the debt-market shakeup by purchasing loans extended to... http://www.peinsider.com/headlines.php?hid=17829 Several big investors have opted not to participate in Riverside Co.'s latest buyout fund because of the firm's decision to raise management fees. Oregon State Treasury and Stanford University's endowment, which are among the limited partners in Riverside's prior vehicles, chose to pass on its new Capital Appreciation Fund. The vehicle, which has a $900 million equity target, hit the market about two months ago. When New York-based Riverside began speaking to investors around that time, it indicated it was raising its fees from the standard 2-and-20 arrangement to a management fee equal to 2.25 of committed capital, plus 25 of the entity's profits. Some investors expressed immediate concern, saying turbulence in the financial markets made for a difficult environment in which to sell a fee hike to investors. Several fund-of-funds operators were also quick to walk away from new vehicle. They, in particular, might have been hard-pressed to rationalize the added expense, since funds of funds charge their investors an added layer of fees in addition to those levied by the underlying funds. Despite the early defections, a source close to Riverside said the firm already held a first close with an undisclosed amount of capital and is on track to complete fund raising during the summer. Even with the higher fees, there are a number of other investors who are willing to commit to the entity, so the wave of departures might not prevent Riverside from meeting its target. What may become an issue, however, is whether the... http://www.peinsider.com/headlines.php?hid=17779 The slowdown in the flow of large leveraged buyouts has some limited partners worried that their fund managers are seeking overly creative ways to invest and straying from their tried-and-true strategies. Investors cite a number of recent high-profile megafund deals - loan purchases, recapitalizations of banks and acquisitions of minority positions - as efforts to merely get money out the door when disciplined fund operators should remain on the sidelines. Most LPs are giving their general partners the benefit of the doubt and hoping their less-conventional investments pan out. Still, they are increasingly scrutinizing the types of deals taking place and voicing concern about the potential for quot;style drift,quot; a cardinal sin of investing that threatens the performance of managers who venture into unfamiliar areas. Among the recent deals by buyout firms that have most significantly captured investors' attention: TPG led a $7 billion capital infusion for Washington Mutual earlier this month. Apollo Management, Blackstone Group and TPG plan to purchase $12.5 billion of Citigroup's leveraged loans, including some that financed their own buyout deals. Apollo, Bain Capital, Blackstone and TPG are rumored to be in talks regarding a similar acquisition of $20 billion of leveraged loans from Deutsche Bank. To be sure, investors understand such deals can prove to be opportunistic ways to capitalize on the credit crisis and could produce high returns. But with the exception of Apollo, which has a... http://www.peinsider.com/headlines.php?hid=17730 Members of Bear Stearns' placement-agent team are exploring their options as they wait to see whether they have a home with their firm's new owner, J.P. Morgan. Bear's group, co-headed by Leo van den Thillart and Paul Sanabria, is looking into the possibility of getting sponsored by another firm, or even relaunching as a boutique. Before selling their company to Bear last year, most of the team members worked together at independent fund-raising firm Crane Capital, which was led by van den Thillart. The jury is still out on whether J.P. Morgan will take on the placement-agent unit. But those in the know say it is unlikely. In 2003, the bank shut down a unit that marketed its own private equity funds and handled some third-party mandates as well - and J.P. Morgan has shown no interest in retracing its steps. And besides, the Bear unit is widely viewed as a mere also-ran among placement agents in the private equity business. As a contingency, van den Thillart has been courting other investment banks in hopes of finding a home for the group. Among firms believed to be on his list are Goldman Sachs and Morgan Stanley, both of which are rumored to have shown at least some interest in being in the private equity placement-agent business over the past several months. Goldman would be getting into the business for the first time, but appears to be trying to build a unit from within. Morgan Stanley has a highly successful real estate fund-raising arm, and there's been talk about it expanding into private equity. It's been... http://www.peinsider.com/headlines.php?hid=17691 The three European banks that acquired parts of ABN Amro last year are close to spinning off two private equity teams that were part of the giant Dutch institution. The separate transactions, to be completed in the coming months, will result in two offerings of private equity holdings totaling nearly amp;8364;3 billion. The goal is to create independent buyout firms by spinning off the following groups: ABN Amro Capital France, a Paris unit that has invested ABN's capital and the money of outsiders, mainly in French companies. AAC Capital, an Amsterdam outfit that has invested ABN's capital in the Netherlands, the Nordic region and the U.K. While the three ABN buyers - Royal Bank of Scotland, Fortis and Banco Santander - are eager to shed the assets managed by those units, the managers of the teams have long wanted to break away and become independent operations. After carving up ABN in a amp;8364;70 billion purchase in October, the three banks quickly identified unwanted, noncore assets, including the two private equity groups and their holdings. Those assets were placed under the management of a special committee made up of former ABN executives, who were charged with managing the holdings and eventually finding buyers for them. The French group is proposing a so-called stapled-secondary deal, in which buyers of its secondary-market offering must also commit fresh capital for new investments the team will make. The group is offering ABN's roughly one-third stake in a amp;8364;250 million... http://www.peinsider.com/headlines.php?hid=17642 Nautic Partners is expected to complete its latest fund-raising campaign in the next couple months, but with less capital than it originally planned to collect. The Providence, R.I., buyout shop is likely to end up with around $800 million when it stages a final close in May or June. Nautic was forced to lower its aspirations after it gave up on receiving a pledge from its earlier backer, Fleet Boston, or Fleet's acquirer, Bank of America. The current fund-raising climate has also hindered Nautic's efforts. When it first hit the market about 18 months ago, Nautic was hoping to raise $1.2 billion. The firm, with the assistance of placement agent Credit Suisse, originally began soliciting commitments for Nautic Partners 6 in the last part of 2006. At that point, Nautic was still counting on receiving a hefty pledge from BofA, which had bought Nautic's former corporate parent, Fleet Boston, two years earlier. Nautic, then known as Fleet Equity Partners, was the bank's investment unit before it spun off in 2000. But around that time, investment banks had begun to put the brakes on commitments to private equity funds, and BofA was no exception. That left Nautic in a tough position, considering Fleet Boston had accounted for more than 25 of the firm's vintage-2000 fund, the $1.1 billion Nautic Partners 5. To be sure, BofA isn't entirely out of the Nautic offering. The fund operator scored a commitment from Conversus, a $2 billion, publicly listed investment entity formed last year by BofA and Oak Hill... http://www.peinsider.com/headlines.php?hid=17590 The credit crunch is contributing to delays in Blackstone Group's latest marketing drive. In one of the most compelling pieces of evidence that broader financial-market turbulence is weighing down the businesses of big buyout-fund operators, the New York investment giant sent a letter to investors within the past couple weeks saying it would postpone the first close for a $20 billion vehicle it is planning. The initial close for the Blackstone Capital Partners 6 fund had been slated for April 11, but is now set for late June, the letter said. The main reason: Blackstone isn't deploying capital at a fast-enough clip. That is, given unfriendly conditions for private-company investments, the $98 billion firm has recently put existing capital to work more slowly than it expected and therefore won't need access to fresh funding so soon. It probably doesn't indicate difficulties on Blackstone's part in winning commitments from limited partners - something the outfit has had no trouble doing in the past. Nonetheless, credit-crunch-related concerns may be causing investors to hesitate. Among their concerns is how lending cutbacks at banks are affecting megafund operators like Blackstone that have traditionally employed substantial leverage in their deals. quot;Any large [general partner] thinks they can will something to happen, but with all these people doing reflective thinking on mega buyouts, that's not necessarily going to happen now,quot; one investor said. Another factor in Blackstone's fund-raising... http://www.peinsider.com/headlines.php?hid=17539 Turnaround firms believe they are about to see the first widespread opportunities to enjoy the fruits of a three-year-old change to the U.S. bankruptcy code, as credit-crunch-related pressures lead to a rise in corporate failures. For now, turnaround shops like KPS Capital, Sun Capital and W.L. Ross amp; Co. are largely content to sit on sizable bundles of cash that they have been amassing over the last year or so - comfortable in the notion that ongoing financial-market turmoil will eventually create more openings for them to invest in troubled companies. But as those players bide their time, a buzz is building that the rush of deals will be more intense than in previous bankruptcy bonanzas. The reason: the mounting corporate troubles dovetail with bankruptcy laws that took effect in October 2005. Under those rules, a company that files for Chapter 11 protection has just 18 months to submit an acceptable reorganization plan to the court handling its proceedings. If the court doesn't approve a course of action by that point, the company's creditors can present plans of their own - a step most would take as they seek prompt repayment. In many cases, the creditors would pursue breakups that would give turnaround shops a chance to swoop in. Under previous rules, creditors were often forced to wait as battered companies remained protected through drawn-out bankruptcy proceedings. quot;Bankruptcies could, and would, drag on for years as companies tried to avoid selling off assets,quot; said the head of corporate... http://www.peinsider.com/headlines.php?hid=17486 J.P. Morgan spinoff CCMP Capital told investors on Friday that Jeffrey Walker will step down as its chairman, not long after he played a prominent role in the firm's first independent marketing campaign. Walker will officially retire from his post at CCMP by the end of June, but will maintain a desk at the outfit's New York headquarters. He will also retain some responsibilities for two portfolio companies in a fund CCMP inherited from J.P. Morgan. Some investors that pledged money to the latest vehicle, meanwhile, are grumbling that Walker shouldn't have been part of that $3.4 billion buyout entity's roadshow if there was a chance he might leave soon after its final close three months ago. That's because his presence in those efforts led them to believe he would remain on board, which is something they took into account when deciding whether to commit capital. quot;If he's on the roadshow, he's active in the fund, and if he wasn't planning to be, he should have said it loud and clear,quot; one investor said. If limited partners expected Walker to be active in the new fund, however, they probably would have been disappointed even if he stuck around. Sources said Walker has had little to do with the day-to-day workings of CCMP and its predecessors for years, and formally gave up leadership by turning over the title of chief executive to partner Stephen Murray in early 2007. For that reason, Walker's departure will have little impact on how CCMP deploys the capital in its new fund. Indeed, CCMP's marketing drive... http://www.peinsider.com/headlines.php?hid=17437 New accounting rules are exacerbating an already-growing disparity between the prices that secondary-market sellers of interests in private equity funds are asking and those that buyers are willing to pay. At issue is the Financial Accounting Standards Board's FAS 157, a broad set of asset-valuation guidelines that will take effect for managers of private equity funds on Nov. 15. Under the rules, such shops will have to assign fair market values to their holdings on a quarterly basis. Many have started abiding by the guidelines already, booking investments at the prices they would fetch if the funds liquidated immediately. Accordingly, limited partners in those vehicles have been revising the values of their stakes - typically upward. When the limited partners try to sell those interests, however, they're finding themselves speaking a different language from potential buyers. That's because the biggest group of buyers - operators of secondary-market funds - don't use current net asset value as a factor in coming up with offers for portfolios of fund stakes. Rather, such players have been basing their bids on proprietary formulas that hinge on the estimated future value of a fund's holdings, minus allowances for risk, management and performance fees, and the uncertainty of taking on obligations for unfunded commitments. And the result is almost always a lower figure than those that sellers are arriving at under FAS 157 guidelines. As if that wasn't enough, buyers and sellers were already having trouble seeing... http://www.peinsider.com/headlines.php?hid=27241 Riverside Co. is about to start marketing its latest buyout fund with a significant new twist: a fee hike. The New York firm plans to charge limited partners an annual management fee equal to 2.25 of committed capital, plus a 25 cut of the fund's profits. That represents a notable hike from the industry standard 2-and-20 arrangement that Riverside has charged on previous offerings from its Capital Appreciation Fund series. Riverside's fee increase comes at a surprising time, considering that fund managers don't hold sway over LPs as they did as recently as a year ago. Reasons: Many pension funds have already filled their 2008 private equity allocations and leverage has become scarce and expensive, causing buyout funds' deal flow to slow to a trickle in recent months. What's also curious is Riverside's stated reason for the increase. Firms making a case for higher fees typically cite above-average returns as the sole justification. The thinking goes that investors may grumble privately about paying more, but they're mollified if they can expect to be more than compensated by higher returns. Riverside, however, is telling its limited partners that part of the reason it needs to increase its fees is to fund an increase in the size of its staff. For example, the firm's operating unit - consisting of those who assume top leadership positions at portfolio companies - has grown from one or two people a few years ago to today's half a dozen. quot;The big question is do you pay for the bigger team if it's not going to get... http://www.peinsider.com/headlines.php?hid=17349 A firm run by General Motors' former private equity team is raising money for its second investment vehicle, an unusually large venture capital fund of funds. Performance Equity Management of Greenwich, Conn., is envisioning a $1.4 billion war chest: $700 million from outside investors and another $700 million from GM. Performance Equity still manages the roughly $6 billion of private equity investments held by GM's pension plan. The firm, which also maintains an office in London, has relationships with a number of top-tier venture capital firms. It is pitching Performance Venture Capital 2 to many investors that don't have access to those firms' fairly exclusive funds. Its list of venture manager relationships is believed to include Accel Partners of Palo Alto, Calif.; New Enterprise Associates of Menlo Park, Calif.; Oak Investment of Westport, Conn.; Redpoint Ventures of Menlo Park; Summit Partners of Boston; and Technology Crossover Ventures of Palo Alto. The fund will also have the capacity to make occasional secondary-market purchases of older limited-partner positions in venture capital funds. GE's contribution technically will be held in a separate account. The capital will be co-invested with the equity that Performance Equity raises from outside investors. Performance Equity will charge limited partners a management fee of roughly 85 basis points, in addition to a 5 carried-interest charge. For its secondary-market investments, the fund will take a 10 share of profits. The... http://www.peinsider.com/headlines.php?hid=47772 A record amount of capital poured into infrastructure-investment funds last year, even as the number of vehicles completing fund-raising campaigns was about the same as in 2006. The figures affirm investors' growing appetite for the likes of roads, water-facilities and pipeline initiatives and show that they are increasingly recognizing the huge outlays required of funds investing in such projects. Funds pursuing infrastructure investments raised a record $30 billion last year, up 87 from 2006, according to London data firm Private Equity Intelligence. A slew of firms seemed to be soliciting capital for infrastructure-investment vehicles last year, with 20 completing their fund-raising campaigns in 2007, just three more than the previous year. Those funds drew in an average of $1.5 billion apiece - far larger than the $900 million average in 2006. The increased demand left last year's fund managers with an average of 40 more capital than they set out to raise. For instance, the former Citigroup project financiers, who set up Alinda Capital, closed their debut fund in June with a whopping $3 billion. Their original target of $1 billion was considered lofty when they began marketing the fund in January 2006. quot;People thought that was ambitious for what was effectively a first-time fund, but that was before they understood the nature of infrastructure investments,quot; said a senior consultant with an investment-advisory firm. quot;They had to see that running a power station is a... http://www.peinsider.com/headlines.php?hid=17255 The next few weeks will likely determine the fate of ArrowPath Ventures, which suffered a potentially serious setback a month ago when one of the firm's top two partners headed for the door. In mid-December, managing partner Tom Bevilacqua announced he was leaving the venture capital firm he helped launch a decade ago to take a position as a managing director at the larger VantagePoint Venture Partners. ArrowPath and VantagePoint both invest in technology companies and have offices in Silicon Valley and New York. Bevilacqua's decision to work elsewhere left ArrowPath with an uncertain outlook. He holds a vast majority of the ownership interest in the firm, and receives the lion's share of fund profits. The remaining investment professionals at ArrowPath are now trying to strike an agreement that would give them a heftier portion of the carried interest and a larger stake in the firm, providing them a greater incentive to stay aboard. If those talks break down, ArrowPath could be forced to unwind and sell off its portfolio of corporate stakes - an offering that could include $50 million of undrawn commitments. ArrowPath finished raising $207 million for its previous fund in late 2000. A third possibility is that Bevilacqua could bring his part of the firm's portfolio with him to VantagePoint. However, that would involve reconciling sticky ownership issues, and deciding how much time he would spend tending to previous investments while focusing on his new outfit. The remaining team members are managing partner... http://www.peinsider.com/headlines.php?hid=17201 A great deal of variation is emerging in the timetables that big buyout fund managers are projecting for their latest capital-raising efforts, reflecting uncertainty that has been creeping into the private equity industry. TPG, which just hit the market in hopes of raising $18 billion for its TPG Partners 6 vehicle, is telling prospective limited partners that it plans to sew up the campaign late in the first quarter or early in the second quarter. That differs from what investors heard from Blackstone Group when the firm sent out marketing materials for its Blackstone Capital Partners 6 fund last week. Blackstone has a $20 billion fund-raising target for that vehicle, and it is planning to be in the market for a year before holding a final close. Likewise, Apollo Management, which has been working to raise $15.8 billion for its Apollo Investment Fund 7 since mid-2007, expects to keep hunting for commitments for much of this year. Investors are viewing each firm's marketing timeframe as a testament to its take on the current market climate - and their sentiments are sure to be influenced heavily by the results. For the managers themselves, a key factor in drawing up their calendars has been weighing the strength of their brands against an industry-wide slowdown that has been in effect since last year. In a steadier market, the firms would probably be setting more similar paces to one another, probably leaning toward quicker fund-raising drives. But as subprime-mortgage troubles transformed into a global credit... http://www.peinsider.com/headlines.php?hid=17150 A team of former Citigroup executives is raising money for a fund that would pursue infrastructure-related investments, in an offering that in certain ways pits them against a group of ex-colleagues. The marketing push, which officially began last month, marks the debut of Roger Miller, Eric Press and Harry Toll under the banner of Alterna Capital. Their new vehicle has a $1 billion equity target, and could draw in far more than that amount as investors clamor to park capital with experienced infrastructure teams. However, the effort means the Wilton, Conn., operation will be competing for investor attention with Alinda Capital, the New York firm led by former Citi project-finance chief Chris Beale. Alinda is also banking on strong demand as it prepares to market its second fund, which could pull in $5 billion. Industry players watching the head-to-head marketing efforts say Alterna's situation is similar to the one Alinda was in last time around. In that offering two years ago, Alinda also sought to raise $1 billion. But, with the help of placement agent C.P. Eaton, it actually ended up with $3 billion. Alterna has also recruited the Rowayton, Conn. firm to work on its campaign. Alterna and Alinda won't be chasing the same investments, though. Alinda's approach is to purchase so-called mobile infrastructure assets such as aircraft, railcars and ships and then generate returns by leasing those holdings to users. It is also looking at equipment used to construct and... http://www.peinsider.com/headlines.php?hid=17101 Landmark Partners' latest secondary-market vehicle comes with a twist: a separate component geared toward investments in newer private equity funds. The Simsbury, Conn., firm just set out to raise $2 billion for its Landmark Equity Partners 14 entity, along with $400 million for a sidecar called Hybrid Secondary Fund that will house the newer-fund bets. Like the main fund, that vehicle will buy packages of private equity fund stakes on the secondary market, where Landmark is one of the oldest players. But unfunded commitments must constitute at least 50 of the balance of each portfolio it purchases. That marks an expansion on Landmark's traditional strategy. While the firm has long taken on portfolios containing unfunded commitments - pledges that the underlying managers have yet to draw upon - it has tended to avoid offerings made up of younger funds in favor of those with more-seasoned investments. By its very nature, the undrawn portion of a fund pool tends to shrink as the holdings age. A recent increase in secondary-market sales that match the sidecar's buying profile explains the motivation for the added component. The idea is that by setting up a separate entity, the firm can grab some of those investments without straying from its core strategy. The jump in such trades stems at least partly from a growing tendency by institutional investors to use secondary-market sales for routine portfolio rebalancings. In the past, distressed sellers fueled the market, and their holdings often consisted of... http://www.peinsider.com/headlines.php?hid=17052 Austin Ventures has begun talking to investors about an upcoming fund that might include a separate but mandatory co-investment component. The technology-focused venture capital firm, based in Austin, Texas, is only in preliminary discussions with limited partners at this point. But the talks offer a glimpse of the shop's fund-raising blueprint for the coming months: assembling a core venture capital fund of roughly $600 million and an accompanying sidecar of $200 million to $300 million that would invest alongside the main vehicle. Investors could be required to commit to both entities. It appears the dual-fund setup would serve the purpose of giving Austin Ventures the capital needed to go after some bigger deals while avoiding the appearance of a single large vehicle. The idea is that when fund sizes creep up in uncertain markets, limited partners often balk out of fear that there won't be enough high-quality investments where their capital could be put to work. quot;LPs say, 'We don't want you to raise a big fund.' But they can say, 'Oh we have a small fund,' quot; one investor said. Still, it is possible the mandatory sidecar would turn off limited partners who aren't interested in committing to multiple vehicles. The main venture capital fund would be Austin Ventures' 10th. The firm completed marketing efforts for its previous fund with $525 million in the first few months of 2006. With $3 billion under management overall, the outfit, led by founder Jeff Garvey, is the largest...