News

Jim Rutherfurd Joins Pine Brook as Managing Director

February 11, 2015 by John McNulty

Pine Brook, an investor in the energy and financial services sectors, has hired James (Jim) Rutherfurd as a new managing director. “My partners and I are very pleased to welcome Jim to Pine Brook,” said Howard Newman, president and CEO of Pine Brook. “We’re confident Jim’s experience and track record with firms operating around the globe will prove to be great assets as we continue to grow and build on our strong relationships in the investment community.”

Mr. Rutherfurd, whose background includes financial services and private equity, will head the firm’s investor relations and communication efforts, a role previously held by Managing Director Joe Gantz, who will continue to serve on the firm’s Investment Committee. Mr. Rutherfurd will also serve on the firm’s Investment Committee and oversee the direction of the firm’s co-investments.

“I am delighted to join the Pine Brook team and am honored to be succeeding Joe Gantz, one of the Pine Brook founding partners, who has done a terrific job building Pine Brook’s relationships in the investor community,” said Mr. Rutherfurd. “The firm’s distinctive ‘business building’ approach to investing in the energy and financial services sectors delivers long-term value to investors, and I look forward to working with Matt Zales and the rest of the Pine Brook investor relations team to contribute to Pine Brook’s success.”

Pine Brook has more than $5 billion of assets under management and invests primarily in energy and financial services businesses. In February 2014, Pine Brook announced the final closing of its second fund, Pine Brook Capital Partners II, LP, with total capital commitments of $2.4 billion. The firm has offices in New York and Houston (twww.pinebrookpartners.com).

Prior to joining Pine Brook, Mr. Rutherfurd oversaw limited partners relationships, fundraising and co-investments in North America and Latin America as a partner at 3i Group, including private equity, infrastructure and credit strategies. Previously, he served as executive vice president and managing director at Veronis Suhler Stevenson, where he led fundraising efforts for the firm’s private equity and structured capital funds. He has also served as a managing director at J.P. Morgan & Co. on the technology, media and telecoms investment banking team, a director in First Boston Corporation’s Media Group, and practiced corporate and securities law at Rogers & Wells (now Clifford Chance). He is a graduate of Princeton University, and earned his law degree at the University of Virginia.

Private Equity CFO Function More Important than Ever

February 10, 2015 by John McNulty

Private equity investors significantly value the finance function and are looking more closely at whether private equity funds have effectively pushed the enterprise towards operational excellence, extending the responsibilities of chief financial officers and increasing the importance of their role, according to “Positioning to win”, EY’s second-annual global private equity survey in collaboration with Private Equity International. Nearly one out of every two investors sees PE as the asset class of choice, and three-quarters of PE firms, recognizing market opportunities, plan to raise significant capital in the next two years. To mitigate the risk of rapid growth, CFOs see the need to shift their focus from tactical to strategic functions like investor relations and portfolio monitoring.

“Our survey clearly shows that investors have added operational excellence to their definition of performance, with 49% of those surveyed identifying it as their top concern beyond track record,” said Scott Zimmerman, the EY Americas Private Equity Assurance Leader. “As a result, firms are counting on CFOs to drive business changes and strategically position their firms to win the competition for capital.”

The survey, conducted between August and November 2014, documents the views, insights and observations of 170 private equity CFOs, financial executives and investors from the Americas, Europe and Asia among all asset classes. Key findings from the survey include:

Compliance
In recent years, CFOs have been spending more time than ever dealing with regulators, but they see themselves as having a better grasp on this moving forward. Reflecting their growing acceptance with regulatory processes, 14% of CFOs say that by 2017 they are less likely to focus on compliance issues; that compares to 3% of CFOs who have currently shifted their attention to other priorities.

IT Security
CFOs are being asked to mitigate, if not eliminate, operating risks. Top among those risks is cybersecurity, with 56% of respondents saying it is the CFO’s responsibility to oversee information security at PE firms. CFOs also foresee an increased focus on cybersecurity, and over the next 12 months they expect to increase fund activity to address various cybersecurity functions, including cyber threat analysis (59%), awareness programs (72%) and compliance programs (63%).

Reporting
As the burden of portfolio monitoring increases, investors are requesting granular information concerning valuations, and PE firms expect requests for customized reports to increase. Three-quarters of investors want tax reporting within four months after year-end, although only 31% are currently receiving reports at this rate, and up to 55% of investors are requesting one to four customized reports per year. To demonstrate operational excellence, PE CFOs believe they could improve investor reporting through transparency (66%), timeliness (50%) and frequency (12%). Meanwhile, 19% of CFOs think that PE fund partners see investor transparency as their most important business activity, and 22% expect this will be the case in two years. As expected, investors prefer to receive their financial (87%) and tax (84%) information in digital format.

Do more with less
Investor demands and requests of PE firms engaged in due diligence will only increase and CFOs must optimally manage their teams to meet the rising expectations. Headcounts are generally not keeping pace with the increase in responsibility. The average finance team is typically a fraction of the size of the investment team, regardless of geography or size of the firm, so CFOs are learning to do more with less.

To meet these demands, firms are looking into digital platforms and redesigned processes, including a possible outsourcing model. As an indication of investors’ preference for in-house versus outsourced functions, portfolio analytics (60%), valuation (60%) and compliance (48%) are preferred by investors to be kept in-house, with fund accounting (31%), treasury (26%) and tax (12%) much more likely to be accepted with third-party involvement.

For a free copy of a PDF of the full survey report click HERE.

SK Promotes Philip Marxen to Principal, Hires New CFO

February 10, 2015 by John McNulty

SK Capital Partners – a private equity firm focused on the specialty materials, chemicals and healthcare sectors – has promoted Philip Marxen to Principal and hired Jerry Truzzolino as its new Chief Financial Officer.

Mr. Marxen, who joined SK Capital as a Vice President in early 2014, is active in sourcing and executing new investments and works with several of the firm’s portfolio companies. Before joining SK Capital he was with The Blackstone Group and TPG Capital.

“We are very pleased to recognize Philip’s contributions with a well-deserved promotion,” said Managing Director Barry Siadat. “He has quickly established himself as an integral member of our team and we are confident that he will continue to create value for our investors for many years to come.”

Mr. Truzzolino joined SK Capital earlier this month as its Chief Financial Officer after serving in a similar position at CI Capital Partners since 2011. Before 2011, Mr. Truzzolino was at Neuberger Berman where he was a Senior Vice President and Co-Head of their Finance Group. Previously, Mr. Truzzolino held financial positions with Lehman Brothers and at The Blackstone Group.

“We are excited to add Jerry to the growing and talented team of professionals at our firm,” said Jamshid Keynejad, a Managing Director of SK Capital. “His experience in fund accounting and compliance are significant assets to our firm as well as our investors.”

SK Capital invests equity of $25 million to $100 million in companies operating in the specialty materials, chemicals and healthcare sectors. The firm closed on its fourth fund in November 2014 with $1 billion of third party capital. SK Capital has offices in New York and Boca Raton (www.skcapitalpartners.com).

Pension Fund Assets Reach New Highs

February 9, 2015 by John McNulty

Assets at US institutional pension funds increased 9% in 2014, to a record $22.1 trillion, according to Towers Watson’s annual Global Pension Assets Study.

Globally, institutional pension fund assets in the 16 major markets grew by over 6% during 2014 (compared to around 10% in 2013) to reach a new high of $36 trillion, according to the research. The growth is a continuation of a trend that started in 2009, when assets grew 18%, in sharp contrast to a 22% decline during 2008, when assets fell to around $20 trillion. Global pension fund assets have now grown at an average annual rate of 6% since 2004.

The Towers Watson study also shows that defined contribution (DC) assets grew rapidly for the 10-year period ending in 2014, with a compound annual growth rate (CAGR) of 7%, versus a rate of over 4% for defined benefit (DB) assets. As a result, DC plan assets have grown from 38% of all pension assets in 2004 to 47% in 2014 and are expected to overtake DB assets in the next few years. In the US, DC assets continued to climb steadily and now represent 58% of all assets, up from 52% in 2004 and 55% in 2009.

“The continuing shift to DC plans means they are becoming the world’s most prevalent retirement savings model,” said Steve Carlson, head of Towers Watson’s Americas Investment practice. “This shift brings a transfer of risk and new tension to the balance between ownership and control, which will test governments and pension industries around the world.”

According to the study, pension assets now amount to around 84% of the global gross domestic product (GDP), substantially higher than the 54% recorded in 2008. In the US, the ratio of pension assets to GDP increased from 95% in 2004 to 127% in 2014.

“While there has been a significant improvement in various pension balance sheets around the world since the financial crisis, many DB pension funds are still in very weak funded positions. However, in the US, pension plans are in a better position, given the contribution flexibility,” said Mr. Carlson.

According to the research, there is a clear sign of reduced home bias in equities, as the weight of domestic equities in pension portfolios fell, on average, from 65% in 1998 to 43% in 2014. During the past 10 years, US pension plans have maintained the highest bias to domestic equities (67% in 2014), having also increased domestic equity bias during the past three years. Canadian and Swiss funds remain the markets with the lowest allocation to domestic equities (33% and 34%, respectively, in 2014), while UK exposure to domestic equities has more than halved, to 36%, since 1998. The research shows Canadian and U.S. funds have retained a very strong home bias in fixed-income investment since the research began (98% and 91%, respectively, in 2014), while Australian and Swiss funds have reduced exposure to domestic bonds significantly since 1998 — down by 31% and 17%, respectively, during this period.

Allocations to alternative assets (especially real estate and, to a lesser extent, hedge funds, private equity and commodities) in the larger markets have grown from 5% to 25% since 1995, according to the research. In the past decade, most countries have increased their exposure to alternative assets, with Australia increasing them the most (from 10% to 26%), followed by the US (from 16% to 29%), Switzerland (from 16% to 28%), Canada (from 13% to 22%) and the UK (from 7% to 15%).

Towers Watson’s Investment business is focused on creating financial value for institutional investors through its expertise in risk assessment, strategic asset allocation, fiduciary management and investment manager selection. It has over 800 associates worldwide, assets under advisory of over $2.2 trillion and over $75 billion of assets under management.

Grey Mountain Adds Two New Professionals

February 9, 2015 by John McNulty

Grey Mountain Partners has added two new professionals to its team with the hiring of Dan Allen as a Vice President, and John Beyer as an Associate.

Prior to joining the firm Mr. Allen served as the CFO of Bolttech Mannings, a current Grey Mountain Partners’ portfolio company. Before joining Bolttech Mannings, he held various financial positions at Eaton, General Electric, and Procter and Gamble. Mr. Allen began his career as an officer in the US Air Force, serving as a technology planning analyst. Mr. Allen graduated from the United States Air Force Academy with a BS in Economics and has a Master’s degree in Economics from Ohio State.

Prior to joining Grey Mountain, Mr. Beyer was an Analyst in the Industrial Group at Robert W. Baird & Co. in Milwaukee, where he advised companies on M&A transactions, equity offerings and other financial advisory services. He has a BS in Commerce from the University of Virginia.

Grey Mountain Partners invests up to $75 million in control acquisitions of companies with enterprise values between $30 million and $150 million. Sectors of interest include aerospace & defense, building products & materials, business process outsourcing, diversified manufacturing, energy & power, financial services, food & beverage, healthcare services & technology, industrial services, packaging, professional services, specialty chemicals, technology, transportation & logistics, wholesale and distribution. Grey Mountain was founded in 2003 by Managing Partners Rob Wright and Jeff Kuo and is based in Boulder with an additional office in Minneapolis and Pittsburgh (www.greymountain.com).

H.I.G. Completes Dividend Recap of DentWizard

February 6, 2015 by John McNulty

Franklin Square Capital Partners has provided a unitranche term loan to finance a dividend recapitalization of Dent Wizard International by H.I.G. Capital, which acquired the company in November 2010.

Dent Wizard offers a range of reconditioning services for vehicles, such as removing dents, dings, creases and hail damage from vehicles without affecting the original factory finish. Other services include bumper, scratch, wheel, leather and vinyl, and carpet and fabric repair services. Dent Wizard provides its services to car dealerships, automobile manufacturers, auto auctions, body shops and collision centers, rental car agencies, insurance companies, fleet owners and operators and individual vehicle owners. Dent Wizard was founded in 1983 and is headquartered in the St. Louis suburb of Bridgeton (www.dentwizard.com).

The unitranche financing was provided by three entities managed by Franklin Square and GSO Capital Partners: FS Investment Corporation, FS Investment Corporation II and FS Investment Corporation III. All three are business development companies (BDCs) which invest in the debt securities of private US middle market companies.

“Consistent with our prior experience, GSO and Franklin Square again delivered a timely financing solution tailored to meet our needs,” said Fraser Preston, Managing Director of H.I.G. “This commitment is a vote of confidence in Dent Wizard’s market position and positions the company to continue to pursue its numerous service and channel growth initiatives.”

Franklin Square, headquartered in Philadelphia, is a manager of alternative investment funds. The firm managed approximately $13.6 billion in assets as of September 30, 2014 (www.franklinsquare.com).

“We are pleased to have the opportunity to make this commitment to Dent Wizard and to work again with H.I.G. on this new direct origination,” said Michael Forman, Chairman and Chief Executive Officer of FS Investment Corporation. “The scale of our platform gives us the ability to provide customized financing solutions to our clients and to support our portfolio companies as they develop and grow their businesses.”

H.I.G. Capital specializes in providing capital to small and medium-sized companies and invests in management-led buyouts and recapitalizations of manufacturing or service businesses. H.I.G. Capital has more than $17 billion of capital under management. The firm was founded in 1993 and is based in Miami with additional offices in Atlanta, Boston, Chicago, Dallas, New York, San Francisco, London, Hamburg, Madrid, Milan, Paris, and Rio de Janeiro (www.higcapital.com).