Ex-PCG Pros Start Advisory Practice

A trio of former Pacific Corporate Group professionals have launched an advisory shop that will focus on channeling capital from institutional investors to general partners outside of the United States and Western Europe.

Based in La Jolla, Calif., Leucadia Capital Partners officially launched this month, led by Monte Brem, chief executive officer; Thomas Keck, chief investment officer; and Jose Fernandez, managing director. The three executives left advisory house PCG over a five month period, beginning with Brem last September. Keck left in December, then Fernandez followed in January.

The firm will have both discretionary and non-discretionary mandates, depending on the size of the clients, but has no plans to raise funds of funds. The firm already has two clients: Kuwait Investment Authority and the George Kaiser Family Foundation, the latter of which also provided the seed money to start up the firm. Neither was a client of PCG. Leucadia will be looking to advise investors with a minimum of $25 million to invest. Within five years the firm aims to have $15 billion under management.

The George Kaiser Family Foundation account came to Brem through a law school friend, who works there. The $5 billion foundation, bankrolled with money its founder made in the oil industry and through ownership of the Bank of Oklahoma, has a high percentage of its portfolio in alternative investments, but in some of the less crowded areas of the industry, such as distressed investing and investing in Asia, said Brem. Brem had previously been advising Kuwait Investment Authority on an informal basis. It couldn’t be determined how much in assets the authority manages.

Looking for other limited partners to advise, Brem said he will turn much of his attention outside the United States. One of the hottest areas for picking up new LPs now is in the Middle East, where there is a lot of liquidity, he said. Leucadia will also be targeting institutions that have spent one or two cycles investing through funds of funds. Now those institutions are looking to build portfolios and establish their own brands as LPs.

On the general partner side, Brem will be avoiding some areas, such as mezzanine, where he believes there is too much competition, especially from hedge funds. The firm will be focussed on such areas as distressed funds and funds outside the traditional markets of Western Europe and North America.

Brem is a former Gibson Dunn & Crutcher attorney who later went on to become president of PCG, overseeing $15 billion. Keck was head of research at PCG, which he joined from Blue Capital, a middle market buyout firm founded by ex-McKinsey & Co. pros. Brem had worked with Keck prior to PCG and brought him on as head of research there in 1999. Fernandez was a managing director at PCG, and prior to that was part of the private equity group at Latham & Watkins. Brem had also worked with Fernandez, a former Latham and Watkins lawyer, before he came to PCG.

The three founders are close friends whose kids go the same schools, said Brem, and they aim to create a firm with a well delineated character and long term stability. “People want to be part of an organization that mirrors their values,” said Brem. “The first step is to create an organization that has clear values. Then you recruit individuals that hold the same views.” The firm aims to have 10 professionals by June.

Leucadia is the name of a progressive community north of San Diego, known for its “creativity and community values,” said Brem.

PCG has seen a number of executives depart over the last few years, some of which have gone on to found other firms. They include Scott Vollmer and Craig White, who launched distressed fund of funds Drum Capital Management. Peter Martenson launched Macquarie’s private equity business in the United States with the help of former PCG staffers Eric Becker and Rick Fratus.—M.C.