Their new enterprise, Alignment Capital Partners , was formed by Austin Long III, Craig Nickels and Charles Preston III. They left UTIMCO in March and invited James Griffin, Jr., former Vice President of The Carlyle Group to co-found the new firm.
Alignment Capital will take a three-pronged approach to creating returns in the private equity arena. Upon reaching its target capitalization of $300 to $500 million, the firm will:
- Allot 60% of assets into a “fund-of-funds” that will invest in LBO or venture partnerships
- Invest the remainder directly in companies alongside other firms with which the partners have ties
- Provide fund-raising and deal origination for the 15 to 20 firms with whom the partners have close ties
Leveraging existing relationships is the strategic focus as Alignment starts operations. Austin Long was a co-founder of UTIMCO’s private investment group, having done deals there since 1987. With Nickels and Preston, the team did $1.5 billion in deals while at UTIMCO.
Griffin raised $8 billion during his six-year tenure at The Carlyle Group and will lead Alignment’s fund-raising efforts. All except Preston have global experience. Alignment hopes to continue relationships with other firms.
The founders said that large institutional investors were gravitating to the larger deals and firms. They want to diversify into the smaller universe.
Long describes Alignment as providing “a version of outsourcing for them. Pension funds have lots of money to put to work and a need to use marquee names, which concentrates dollars into the high-end segment of the market. If you look in the Venture Economics Yearbook, over time, you’ll see returns on these tend to gravitate toward the high teens. The small and mid-sized deal returns gravitate toward the mid-twenties.”
The firm’s structure was designed to “align” the interests of the limited partners and the manager, while eliminating the detrimental economic impact of the dual layer of fees and carried interest normally associated with a fund-of-funds. Long says carried interest charges will be less than 10%.
The company will be headquartered in Austin, Texas. with offices in Washington, DC and Cupertino, California.
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