While most larger institutional investors recognize the opportunity for alpha and diversification provided by smaller buyout and venture capital funds, the effort and resources required to source, access, evaluate and monitor these smaller commitments can create implementation challenges. However, we believe that this segment of the market can enhance overall private equity portfolios by providing better net returns with lower correlation to public markets. Executing an investment program in these attractive but more difficult segments is where we add value for our clients.
We also believe that each client’s investment needs are different and we have built all aspects of Grove Street to focus exclusively on providing truly customized separate accounts to a small number of clients. The inherent flexibility of this approach allows us to address changing investment needs of one client without compromising the goals of another. As an investment organization we are closely aligned with our clients’ interests and many consider us simply as an extension of their investment staff. We understand that our services have to integrate seamlessly into our client’s operations. To maximize levels of service and maintain a high bar for investments, we only work with a limited number of clients.
Lastly, alignment of interest is the central principle of the company. We invest our own capital alongside every client program and further align interests through deferred, end-of-program compensation. Separate account programs are our only investment structure and sole business, minimizing potential conflicts and distractions. Further benefits »
Building successful private equity portfolios requires a disciplined approach to diversification; balancing risk across strategies, sectors, time and geographies throughout cycles, as market timers rarely outperform over the long term. We apply this principle to all our client portfolios irrespective of the charter, and then adjust the scope of these parameters based on the client’s objectives. However, we will also selectively take educated, contrarian positions based on market conditions and trends.
We further believe that our deep expertise and large network of relationships are instrumental in selecting the most promising managers of the next cycle. This is particularly relevant for independent reference checks and the judgment to invest confidently in a newer team as well as to stop investing with a well established team that we do not believe will outperform going forward. Experience also guides our understanding of the interpersonal dynamics within a team, our assessment of their recent unrealized performance and the fit of the strategy within the market environment.
We also believe that our strong relationships with General Partners increase our ability to position our clients and our firm as an attractive “investor of choice” for even the most selective fund management teams. More investment considerations »