Firm: Siguler Guff & Company
Fund: Siguler Guff Small Buyout Opportunities Fund II LP
Fund Size: $940 Million
Original Target: $600 Million
Portfolio Manager: Kevin Kester
Headed by Kevin Kester, a managing director at the firm, the new fund of funds will consist of about 70 percent fund placements and about 30 percent co-investments. So far, about one third of the new fund has been committed.
“We define the small end of the market as family and owner-operated companies with less than $15 million in EBITDA,” said Kester, who prior to Siguler Guff was in charge of alternative investments at the $41 billion Colorado Public Employees’ Retirement Association. “Funds that invest in these companies often do well because they take advantage of less-competitive deal flow. We also look for funds that pay low entry multiples and use only a moderate amount of leverage.”
The typical size fund in the new fund of funds will be about $200 million.
“There are a lot of funds out there,” said Kester. “But it takes a lot of effort to find good funds. But given the inefficiencies at the small end of the market, there are a few diamonds in the rough, both in terms of companies and underlying fund managers.”
As far as investments, Kester said that he has had good results in funds that invest in industrial goods and services, healthcare and consumer goods, as well as the food and beverage industry.
Fund II is the successor to the vintage 2007 Siguler Guff Small Buyout Opportunities Fund LP, which closed with $505 million in commitments.
Fund I has performed reasonably well. The Montana Board of Investments contributed $25 million in 2007, and that investment was generating a net internal rate of return (IRR) of 11.5 percent and a net return multiple of 1.4x, as of December 31, 2012, according to data from the Montana board.
Like other Siguler Guff funds of funds, this one will charge its own management fee and carry fee, although the firm declined to discuss the specifics.
Overall, the new fund has 138 investors, including a healthy mix of pensions, endowments, foundations and family offices.