The fund is still fed heavily by Soros, which is putting at least $250 million into this fund, though the exact figure wasn’t clear. TowerBrook, which spun out of Soros in April, was still effectively part of Soros when it raised Fund I.
But Fund II was always part of the plan, said Neal Moszkowski, co-CEO of TowerBrook. Moszkowski migrated from Soros with several other of the TowerBrook team and is a former Goldman Sachs banker. TowerBrook first sent out books in August and found a good fundraising environment, he recalled.
TowerBrook’s investing strategy is “a little contrarian,” said Moszkowski, as it is “trying to buy companies that have a certain degree of complexity” and aren’t efficiently sold by a good investment bank or have less competitive sale processes. Also, many of the companies TowerBrook buys are short on management skills, often being family owned. TowerBrook touts an advisory board that helps it identify targets which includes David Neeleman, CEO of Jet Blue, one of the firm’s better known investments. It also recently added Andrew Rolfe, former president of Gap’s International Dinsia.
“We think of ourselves as guys that are looking for some trouble,” said Moszkowski. “That requires you think more broadly about the industries you invest in.”
LPs in the fund include CalPERS, which increased its participation in the latest fund, and insurance giants AIG and MetLife. The fund had a 90% re-up rate, which accounted for about 60% of the money in the fund. The target of the fund was $900 million. “Part of the reason for spinning out and raising Fund II was to diversify the investor base,” said Moszkowski.
Soros will sometimes help the mid-sized firm play big. “We expect we’ll occasionally make a larger investment than what you’d expect from a $1.3 billion fund,” said Moszkowski. Out of its first fund, for example, it made a $250 million investment in Cablecom, the largest cable communications provider in Switzerland, which it exited in October 2005.
TowerBrook is led equally out of its offices in London and New York, which Moszkowski said grew “organically,” side by side. In the first fund, investments were made, in dollar value, roughly half in Europe and half in the U.S., though there were fewer deals in Europe since the ones there were larger. The current fund will make between 15 and 20 investments, with equity stakes of between $50 million and $150 million.
Aside from Jet Blue and Cablecom, past investments include Irish telecom provider Eircom and Auto Europe, a global distributor of leisure car rental services.No deals out of the latest fund have been announced yet, although Moszkowski said the firm has competed one deal in healthcare services. There is a pipeline of four more investments it expects to complete in the next three months here and in Europe.