Below is some insight from Lou Moelchert, the founder of Private Advisors LLC, on the sale of 60% of the Richmond, Va.-based fund of funds to New York Life Investments. The firms announced the deal Thursday. We’ll have a broader story on the deal in the next issue of Buyouts.
*In short, New York Life’s investment provides more certainty to Private Advisors LPs, and it should be able to provide seed money for future products. Private Advisors had a few setbacks this year, namely in Europe, where it scrapped a fund of funds plan and lost a few executives. Firm co-founder Rafael Astruc also resigned earlier this year. “When you go through market periods that are as unsettled as last few years have been, this should give our LPs greater certainty,” Moelchert said in a phone interview.
*Moelchert said the European fund of funds effort probably would have been successful with the backing of a big institution like New York Life. “If we had had substantial limited partner that would’ve provided seed money, I suspect that we’d have had that up and running today.”
*Moelchert expects Private Advisors to collaborate with New York Life’s existing PE fund of funds, New York Life Capital Partners, by sharing info about prospective investments. He doesn’t expect to compete with NYLCP and said the groups have only one overlapping fund investment (he declined to name it).
*The deal with New York Life has been brewing for a few months, and Moelchert said Private Advisors has had “many opportunities to consider other potential partners,” suggesting we could see more consolidation in the fund of funds area. Private Advisors chose New York Life in part because he said it has a track record of buying financial companies to form subsidiaries that continue to manage themselves.
*Moelchert suggested other indie fund of funds might make similar deals: “I think there is a danger that firms can get caught without the financial ability to continue to grow and can just get squeezed out of the market over the period of time,” he said. “Many of our competitors are no longer in existence.”