Up and Coming Funds
What are some funds that are fairly new (semi-recent first or recent second fund) with reputable partners and clear room to grow? For example, Nonantum Capital in Boston is a bunch of former Charlesbank and raised a ~$450MM first fund.
Some interesting earlyish funds in my opinion:
- Arcline
- Stellex
- Cove Hill
- Baypine
- Cornell I think is on fund II or III
- Gamut
- Searchlight
- BGH in Aus
All of these funds are spinouts from good platforms that spun out without fully intact teams. Faster advancement with assumed good deal sourcing.
While some (Cornell Capital) are pretty institutionalized since they have been around 7 years, most you would have the ability to grow with the firm, to make it to the next step rather than being pushed out after your two year associate stint.
You want to be on the ground floor of say the next Clearlake, because you are then the mid-late 30s partner who has 4-6% of the total carry pool of say a 10b fund. (2x return payout is 80m - 120m). You aren't really getting those shots on goal at institutionalized platforms.
+1 on Cove Hill
The firm mentioned in the very first comment is Recognize. In addition to David Wasserman, the guy you mentioned from CD&R, the other two are Frank D’ Souza (co-founded Cognizant) and Josh Miller (co-founded Atomic, the incubator that now has a fund attached and launched companies like Hims/Hers).
Agree with several other mentions.
Stellex is deep value, operationally-intensive turnaround stuff. Distressed-for-control is not for the faint of heart. Ray is one of the few senior Black people in this business and you love to see how well he's grown the firm. They raised $870m in a one-and-done close on a $750m target for Fund I, and a touch over three years later raised Fund II at $1.775b on $1.25b target.
Arcline, Gamut, and Cove Hill are all similar to each other. (a) Small core founding team, usually around a primary personality, (b) background at a large, well-respected platform, (c) significant critical mass in their first fund, (d) attractive pace of deployment to date.
Another one not mentioned is Brightstar. Andrew has a really cool thing with his operational role during his time at Lindsay Goldberg.
"Associate 3" hit the nail on the head with his 1:22 comment. If you can get into one of these places during their first or second fund, you have decent odds at getting a favorable carry position and long-term seat in a firm that raises successive billion/multibillion-dollar funds.
Some have been mentioned already, but what comes to mind for me:
BayPine (Boston-based, founded by a co-founder of Silver Lake and a Blackstone exec, focused on digitalization and already doing very big deals)
Brightstar (NY-based but offices all over, founded by the exec who built up Lindsay Goldberg, seem very operationally focused. rapidly growing and heard they have crazy returns so far)
Crosspoint (SF-based, cybersecurity experts with significant operating experience and just brought a senior Bain Cap exec over)
Gamut (NY-based, ex-Apollo and KPS people using the same playbook, so I expect them to do well)
Already mentioned on this post - CoveHill and Arcline are your best bets. Cove Hill is a Bain spin out with a great team and track record. Arcline is a golden gate spin out with arguably the best track record in middle market private equity. Raised the largest fund 1 for a new fund in a decade and then raised a second 2.75B fund a year and a half later (likely after investing most of fund I). Their portfolio is incredible and they underwrite macro trends before anyone else sees them so have a reputation of paying up for businesses that others discount. We run into them a lot in pretty competitive auction processes, but they convert deals better than most other shops that are 10x larger/older. Think they have an analyst program if I’m remembering correctly. Not sure if Cove Hill still has one, but they used to when just getting started.
Would also add that both are recruiting some of the best junior/mid-level investors I’ve seen in PE. CoveHill’s team has an ex-Bain consulting leaning and all coming from Bains private equity diligence group - solid group in consulting. Arcline’s associates (“underwriting associate” is what they call it, but this is your typical deal-team associate) probably some of the best junior level folks in PE today. Don’t know of Cove Hills recruitment process, but Arcline’s is pretty intense (which probably explains the talent level). Have banking friends that are running sellsides that talk about Arcline’s junior investment team (associates/Senior associates) leading diligence calls with management and that they supposedly ask questions like they’ve spent 20 years in the industry/sector instead of 1 or 2. I get the sense Arcline recruits for very operationally-intense folks with a lot of sector specific knowledge, but they play in a lot of sectors (life science, aero and defense, cap equipment, med device, etc.) so not really sure how they do it.
Would be curious to hear how others think of newer funds’ junior teams. Looking at the junior team of the funds you’re interested in and their career trajectory is probably the best way to get a sense of your potential paths, but still imperfect. I’d try the cold email approach and reach out to associates at these various funds to get in the door - newer/smaller shops are much more likely to respond (speaking from experience at a sub-1B industrials focused shop)