Editor’s Letter: Tracking first-time funds in the strong fundraising market

A firm I’ve been tracking for a few years, Dunes Point Capital, appears to be heading for final close on its debut institutional fund, possibly by January, a source tells me. Dunes Point II is targeting $600 mln with a $650 million cap. Check out my story here.

The Rye, New York, firm was launched by ex-GSO Capital executive Tim White in 2013. It targets investments in middle-market industrials companies.

It’s made two investments this year: Sonneman – A Way of Light, which designs and makes architectural lighting; and Specialty Products & Insulation.

Dunes Point is one of many early funds Buyouts has been tracking for the past two years. I created and maintain a database of mostly first-time funds with more than 50 selections based on recommendations from limited partners.

The database has grown over two years, even as I removed several first-timers from the list after they held final closings.

Dunes Point appears to be one of the success stories on the list as it gets close to its target. The fund has taken time to raise: I’ve heard about it from LPs since last year.

Other success stories include Whitehorse Liquidity Partners’ second fund, which closed on $1 billion this year, and Center Rock Capital Partners, a Wynnchurch Capital spinout that closed this year on $580 million.

Sources tell me that as long as the fundraising market remains strong, executives at bigger shops will keep taking the risk of leaving their jobs and starting their own shops.

It’s a good time to give it a shot, but ironically the strong market also works against first-timers. That’s because established firms are taking full advantage of the strong fundraising market by coming back earlier than expected, raising larger funds and creating new products to address different strategies.

LPs, who for several years have been paring down portfolios to include only core relationships, are happy to commit dollars to those managers they are keeping.

It’s a tough cycle, but most LPs do keep a slight allocation open for emerging managers and some are willing to take the risk of backing a brand-new firm.

We’ll see how 2019 shakes out — signals are pointing to a global economic slowdown. But for now the fundraising market remains strong.