Executives at Blackford Capital like to talk up their Michigan Prosperity Fund, which they have described as a $50 million buyout fund launched in 2012 and earmarked mainly for in-state investments. But the fund isn’t a blind pool in the conventional sense.
In fact, the firm has formed individual limited partnerships for each of the nine portfolio companies that it describes as being in the “fund,” according to Eric Kamstra, director of investor relations.
The firm lines up commitments from investors in advance of each investment, said Kamstra, and then it secures the rest from co-investors after the deal comes to fruition. Collectively those commitments, coming from 2012 to 2016, add up to $30 million. It has deployed another $17 million from co-investors.
In an interview earlier this month, Kamstra and Martin Stein, founder and managing director of Grand Rapids-based Blackford Capital, told me that the $50 million Michigan Prosperity Fund was 80 percent deployed, with room for another platform investment or two.
I subsequently wrote a column to that effect, adding that the firm plans to raise a successor fund called Great Lakes Prosperity Fund, featuring a broader geographic mandate. On its website the firm also has posted two news stories, one published in November 2015 by Dow Jones, and another by MiBiz, both of which describe similar efforts by the firm to raise a successor to a $50 million debut fund.
Kamstra said that he and Stein did not intend to mislead me, and that Stein had described the fund to me as a “hybrid” pool. (I do not recall him using that term, and neither the Dow Jones nor the MiBiz story refers to the debut fund as a hybrid.) He said the executives feel as though they have committed capital because of the stability of their investor base and because their investing is more formalized than that of most independent sponsors. But he said that the Michigan Prosperity Fund is not a single limited partnership or blind pool.
After the Dow Jones and MiBiz stories ran, the firm received feedback that a single-state fund — which investors may perceive as an economic development fund — would not be as desirable as a fund with a broader geographic focus, Kamstra said. That is why, as I reported, the firm is talking about launching Great Lakes Prosperity Fund next year. Kamstra said the firm would like the successor to have a conventional limited partnership structure.
Action Item: Learn more about the firm’s portfolio here.
Image of Sherlock Holmes courtesy Ostill/iStock/Getty Images