Grove Street May Pledge $400M-$500M Next Year

Grove Street Advisors may commit as much as half a billion dollars next year to private equity fund managers, although the amount ultimately depends on who is coming back to market, said Catherine Crockett, a general partner with the firm.

Indeed, next year’s private equity pledges could handily surpass the amount committed in 2009, which will probably top off somewhere between $270 million and $300 million, said Crockett. A typical yearly pledge total for the firm is roughly $550 million. Grove Street Advisors, which creates customized investment programs for its clients, likes managers who add operational expertise and is considering committing to more defensive strategies, such as gas and electric infrastructure.

The firm invests in Asia, Europe and the United States. It has a continuing interest in areas with high GDP growth, such as India and China, where management teams are young and unproven, although those markets could now be less attractive because a lot of capital is there. “We’re watching those markets,” said Barry Gonder, a general partner at the firm. “We have relationships there we like, but those places can only support so much capital,” he added. Regarding Latin America, Gonder noted that he feels uncomfortable with the region due to its “very venture-like” returns. “We’re thinking about it but are still very cautious,” he said.

Typically the Wellesley, Mass.-based firm commits to buyout and growth equity funds that are as small as $100 million and as large as $4 billion, but its sweet spot is funds of $350 million to $1 billion in size.

Managers that have received pledges recently include early stage venture capital shop Charles River Ventures; special situations manager KPS Capital Partners; and Wynnchurch Capital, a mid-market buyout shop. Grove Street Advisors has also done some secondary investing this year and intends to do more of the same in 2010; the firm does not buy portfolios of secondaries, only single funds.

Clients of the firm include four U.S. pension funds; two European retirement systems; one Middle Eastern insurance company; a pool of Australian pension funds; and one family office.