Crestline Investors, an institutional alternative investment manager, has partnered with Kirchner Group to launch a new business unit on the Crestline platform.
The Kirchner team will be the cornerstone of this initiative, called Crestline-Kirchner Private Equity Group, focused on acquiring, managing and investing in underperforming private equity assets, portfolios and funds.
Crestline’s new business line will be led by WB (Bud) Kirchner, founder of the Kirchner Group and architect of its "Successor GP" Program.
This business complements Crestline’s position in hedge fund secondary investing and allows the firm to provide a full-service solution to institutions with underperforming private equity and hedge fund portfolios. It also adds significant opportunities for Crestline to deploy capital on behalf of its investors.
"We are pleased to welcome Bud and his team to Crestline and to add a powerful new business to our institutional platform," says Douglas K Bratton, president and chief investment officer of Crestline. "The team brings to Crestline a 28-year track record of restructuring companies and has been successfully deploying its model across a series of portfolios ranging from early stage venture to mid-market buyout since 2004."
There is an estimated USD100bn in private equity assets managed by funds past their investment periods, according to industry estimates. Many of these so-called "zombie funds" have serious issues of alignment between the general partner and limited partners. As a result, an increasing number of institutional investors are looking for creative and effective ways to restructure these funds and rationalise their private equity portfolios.
"This partnership provides tremendous validation of a model that we pioneered years ago at Kirchner Group," says Bud Kirchner. "Limited partners are realising that there are alternative solutions to underperforming funds, and now is the right time for us to scale up to meet rapidly increasing market demand. I am excited to join with Crestline to continue building on the business lines that we have developed, giving us the institutional infrastructure and access to capital to best serve investors."
The new business unit will focus on the following:
• Successor general partner: acting as a fiduciary to replace or complement the general partner in order to help better align interests, find liquidity and maximize value for limited partners.
• Advisory services for limited partners: managing or monitoring an existing troubled portfolio of private equity funds on behalf of limited partners.
• Successor fund creation: consolidating direct private equity investments into a fund structure to help manage, monitor and exit positions on behalf of a direct private equity investor or group of investors.
• Investment opportunities: sourcing and structuring investment opportunities derived from the aforementioned activities, including:
â—¦ Secured lending and/or investments in private equity portfolios to provide follow-on capital at the portfolio level
â—¦ Secondary purchases of some or all of a fund’s limited partnership interests
â—¦ Providing follow-on capital at the underlying company level
