Growth Equity Firm Formed By Ex-GS Execs Collects $170M

The firm is trying to raise $400 million for the fund, Pharos Capital Partners III LP, which is the same amount the firm raised for its second fund, closed in 2006.

Pharos Capital typically invests $10 million to $30 million in buyouts and growth capital investments, primarily in the health care, business services and technology sectors. The firm’s portfolio includes Atherotech Inc., a Birmingham, Ala.-based developer of heart-focused diagnostic products; Clearwire Inc., a Kirkland, Wash.-based provider of broadband internet service; and Time Domain, a developer of radar and communications devices for commercial and military markets.

Pharos Capital was reportedly in the market raising its third fund in the fall of 2010; the firm declined to comment on the record whether the fund has been in the market continuously since then. In September of that year, the Louisiana Teachers’ Retirement System committed up to $35 million to the fund, according to a Private Equity Online report at the time. The Dallas Police & Fire Pension System committed $50 million to the fund, according to a November 2011 report in Pensions & Investments.

Another source familiar with Pharos Capital’s performance said that its “track record is somewhat volatile though overall returns on [its] last fund are good.” As of Dec. 31, 2011, Pharos Capital’s second fund had generated a 12.4 IRR and an investment multiple of 1.50x for the California Public Employees’ Retirement System, which committed $25 million to what it deems a 2005 vintage fund. Most of that commitment—$23 million—had been drawn down, while the fund had distributed about $7.6 billion back to the pension. CalPERS estimated the remaining value of its investment to be almost $35.6 million.

Youngblood, the former chairman of the $30 billion mutual fund company American Beacon Funds and now a director of Starwood Hotels and Lodging, Burger King Corp., Gap Inc. and Energy Future Holdings Corp., launched Pharos Capital in 1998.

His co-founders are Robert Crants and Michael Devlin, two former executives with Goldman Sachs. Crants was a founding member of the special investments group, which developed and marketed derivatives and other products, while Devlin was a founding member of Goldman Sachs’s business development group, where he helped identify trading positions for the firm, according to Pharos Capital’s Web site.