LPs

Los Angeles City backs HIG spinout CenterGate

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Los Angeles County Employees’ Retirement Association, Lacera, private equity, pension fund
The Hollywood sign is seen between palm trees and snow-dusted mountains in Los Angeles on Jan. 7, 2008. Photo courtesy of Reuters/Danny Moloshok
  • Centergate roughly halfway toward $300 mln target
  • Firm specializes in middle market buyouts
  • LACERS targeting small, mid-market managers

The Los Angeles City Employees’ Retirement System continued to expand its exposure to small and lower middle market private equity with a $10 million commitment to CenterGate Capital, according to board documents.

Los Angeles prioritized commitments to small and middle market funds over the last year, having most recently allocated $10 million to Angeles Equity Partners’ $300 million debut in December. A little more than 25 percent of LACERS’ private equity portfolio was invested in small and middle market funds as of June 30, 2014, according to pension documents. The portfolio was 10 percentage points short of its target for those funds.

CenterGate set a $300 million target and a $350 million hard cap for its first fund, according to Los Angeles City documents. The firm is around halfway toward its target, one market source told Buyouts.

CenterGate will charge a 2 percent management fee on committed capital through the fund’s investment period, at which point the fee falls to 2 percent of invested capital, according to Los Angeles documents. Fees charged to portfolio companies will fully offset the management fee. The general partner will commit $15 million to the fund.

Former HIG Capital executives Tiffany Kosch and Stenning Schueppert co-founded CenterGate in 2014. Managing Director Lewis Schoenwetter, formerly of HIG and Eos Partners, joined the firm in June, Buyouts previously reported.

CenterGate invests in lower middle market buyouts in the business services, industrials, energy services, consumer and healthcare sectors. The firm plans to acquire businesses with less than $250 million of revenue or $20 million EBITDA, according to the Los Angeles City investment memo. Fund I will make 10 to 12 investments with the ability to allocate up to $30 million of capital per deal.

The firm completed at least one investment in 2015 with its acquisition of Marketplace Holdings, which operates property marketing and advisory services business The Oil & Gas Asset Clearinghouse.

Action Item: For LACERS report on CenterGate, visit http://bit.ly/1Pq7RNK

Photo: The Hollywood Sign is seen between palm trees and snow dusted mountains in Los Angeles January 7, 2008. REUTERS/Danny Moloshok