As private equity continues its shift away from the traditional financial-engineering model, there is a premium being placed on executives that have either run their own companies or are linked in politically. It’s why KKR is busy filling its ranks with former corporate CEOs, and Apollo is bringing in ex-senators to its advisory board. Nogales Investors Founder and Managing Partner Luis Nogales should feel no pressure to follow suit, as he fits the bill on both ends.
Nogales has served at the helm of media giants Univision and United Press International (UPI) and has also worked under Presidents Richard Nixon and Bill Clinton. While he has an enviable resume and has rubbed elbows with many of the country’s powerful elite, Nogales says that his primary responsibility today is to look out for the pensioners whose capital he’s investing.
Hailing from Southern California, Nogales graduated from San Diego State University and earned his law degree from Stanford Law School. He worked for Stanford University briefly after graduation, until he was chosen to be a White House fellow in 1972.
Although he may not have known it at the time, Nogales’ early work in the White House was putting him in contact with many of the country’s future leaders. Nogales got to spend quality time with Colin Powell, traveling to China and riding alongside the future Secretary of State on the Trans Siberian Railway. Also, when he served as a trustee for his alma mater Stanford, Nogales met Powell’s successor, Dr. Condoleezza Rice.
Nogales’s presence in political circles is no accident, as he has made an effort to be very active in causes close to him. When he was a law student, for example, he was one of the co-founders of national student organization MEChA (Movimiento Estudiantil Chicano de Aztlan). He says that the group was founded to promote diversity. “Our motivation was that we needed to create opportunities and diversity for higher education. That was the focus,” says Nogales. “At the time I went to Stanford, I think they admitted a Hispanic every other year… It’s much different [today].”
Nogales has also served as City Commissioner for the City of Los Angeles, where he founded a caucus for Hispanic commissioners, and he has been active in charities, donating $1 million in 2002 to the Mexican American Legal Defense and Education Fund (MALDEF).
However, Nogales is by no means a lifetime politician. Perhaps his biggest achievements have been in the boardroom, and he credits his experiences in business as shaping how he approaches his investment strategy.
In particular, Nogales says his brief stay as president and chief executive officer of UPI was one of the greatest learning experiences of his career. “When I was running UPI and the company was in bankruptcy, that was a great learning situation,” he says, explaining that it allowed him insight into how even dominant companies can quickly lose their focus.
“The great lesson from [the UPI experience] was that you need to make decisions on a timely basis. If you don’t make tough decisions, sooner or later you’re going to pay the price for that,” Nogales adds.
Nogales’s corporate background isn’t only confined to triage situations. At Univision, where he served as president for a stint in the ‘80s, Nogales had the foresight to capitalize on the exponential growth of the Spanish language media market. Today the company is the largest Spanish language television outlet in the U.S. and is the subject of a possible buyout bid from investors including Bain Capital, Blackstone Group, Carlyle Group and Kohlberg Kravis Roberts & Co.
From the corporate arena, Nogales transitioned into private equity, and his first taste of the asset class reportedly came as an advisor to Deutsche Bank’s private equity arm in Latin America. Today Nogales leads Nogales Investors, a firm he founded in 2001. As firm head, Nogales has established a position that allows him to roll both skillsets—politics and business—into one model.
Politically, Nogales has proven adept at reaching out to new investors and raising capital. The firm is within a month or two of notching a final close on its second fund, Nogales Investors Fund II, which is aiming for at least $200 million. Nogales’s first fund raised $100 million, with commitments coming from The California Public Employees’ Retirement System (CalPERS), California State Teachers’ Retirement System (CalSTRS), Citigroup and Washington Mutual, among others.
From a business sense, Nogales is targeting an area of the market that leaves little room for mistakes. The firm invests in small- and middle-market businesses across the United States and writes equity checks of between $5 million and $20 million. Its portfolio companies include motorhome maker Alfa Leisure, gaming device maker Video King, and retail chains Chick’s Sporting Goods and G.I. Joe’s.
Nogales cites that having a focus on the smaller market provides more opportunities, but also notes that nothing is easy in that segment. “Different sized companies have different challenges, he says, adding, “There are many more opportunities for investment but they’re all labor intensive.”
For Nogales, one of the biggest challenges in the private equity world today is offering help to young companies that need guidance. However, he says that his background enables his firm to better partner with these smaller businesses.
“What these companies need is not just capital, they need management advice, strategic guidance and contacts with larger companies,” Nogales says.
Even to an outsider, that portrayal rings up images of a merger between business and politics. Given Nogales’s makeup, that’s probably by design.