Hidden in Plain Sight: Private Equity, Part 3
HighGround’s private equity portfolio is built by making investment commitments to a sequence of funds over time, diversified by manager, strategy, sector and geography.
Private equity is a relationship-driven business. To be successful we seek to foster long-term, trusted relationships with high-quality, proven, top-performing GPs. We also need to be critical and discerning of the relationships we keep, which often leads to tough choices at times between fund managers and strategies. HighGround has an obligation to be transparent and swift in the execution of our due diligence and investment decisions. This conduct leads to credibility in the private equity market and can provide access to highly sought-after funds that guard their capacity carefully.
HighGround invests through fund vehicles that are created under a well-established legal framework and designed to protect the interests of investors and define the rights and responsibility of the fund manager (GP). The majority of HighGround’s PE commitments are made through funds, but we also make less frequent commitments to co-investments. Co-investments are small investments that LPs, like HighGround, make directly in a single company. Co-investments are made through an introduction by a GP we know well, and the GP assists us in due diligence and analysis of that investment. These are on a case-by-case basis, depending on how a GP is structuring a specific deal on a company.
Developing a private equity investment program is challenging but rewarding. It requires making informed judgments based on a multitude of quantitative and qualitative factors and having the conviction to commit capital to a GP that is employing a specified investment strategy for 7-10 years. Because of the risk premiums associated with private equity, we expect to receive higher returns from our private equity program than can be generated by public equities.
PRIVATE EQUITY IN THE WILD: The pop-up email Gateway Defense Quarantine Notification message we see regularly on our desktops at HighGround Advisors is the handiwork of Barracuda Networks, a network and data protection software company that was acquired, grown and recently sold by Thoma Bravo, a leading GP in the large technology growth space. HighGround is a serial investor in Thoma Bravo’s PE funds.
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