The fund will target 15 to 25 investments of between $10 million and $40 million in companies with enterprise values of between $3 million and $30 million. The maximum single investment exposure will be 15 percent and the expected hold per investment will be five years.
Balance Point will focus its latest fund on business and information technology services, healthcare and e-commerce companies.
The firm’s second and third funds have invested at least 40 percent in business services, the largest chunk of their investments, while its first fund was 22 percent in business services but 32 percent invested in media and telecom.
Its first two funds were raised as small business investment companies, or SBICs, but the firm branched out with Fund III, though stayed consistent on overall strategy.
SBICs are privately-owned and managed investment funds that are licensed and regulated by the Small Business Administration. The SBA also offers government-backed leverage to SBICs. According to the SBA website, SBICs are able to capitalize up to two-thirds of their fund with this SBA leverage, making fundraising a much faster, more streamlined process.
Balance Point raised its fourth fund earlier this year, closing on almost $86 million of its $100 million target. That was considerably less than Fund III, which targeted $400 million and closed on $375.7 million of that in 2018, according to a Form D.
The Louisiana Teachers materials said Fund IV had $281 million in available capital, including SBA leverage. It was not clear whether this fund was an SBIC or not.
A March press release announcing the closing of Fund IV appeared to suggest it had closed so as to provide Balance Point with more immediate capital to invest during the height of the covid crisis.
Fund IV was not included in any of the performance data provided by Hamilton Lane to Louisiana Teachers at its meeting last week. Fund III, a 2017 vintage, had a 13.7 percent net internal rate of return and a 1.1x total value to paid in capital multiple as of June 30. 2015 vintage Fund II had an 18 percent net IRR and a 1.8x TVPI. 2011 vintage Fund I had a 15 percent net IRR and a 1.9x TVPI.
Balance Point did not respond to requests for comment for this story.
The firm was founded in 2010 by Seth Alvord as a spin-out from First New England Capital. Eric Dale rounds out the firm’s leadership. It is based in Westport, Connecticut, and has nine investment professionals and three back-office employees.
Louisiana Teachers committed $50 million to Fund V. Employees Retirement System of Texas also committed $125 million to the fund.
Action Item: read Balance Point Capital’s form ADV here.