Early Life Cycle Funds

Through our deep and local US relationships, the Richwood team can source and identify local private market fund manager teams at various stages of their platform development not typically accessible by Japanese investors that do not have a presence in such market.

Unless a Japanese firm has a long-term presence in a particular region or market in the US, scanning the landscape for potential local partners can prove a difficult exercise.

  • Dynamically invest with managers through multiple structures
  • Economic benefits, now and/or pre-negotiated for the future

Richwood Target Managers

Richwood Specialized Manager Definition

Richwood typically defines and targets specialized managers as those with:

Target Fund Size
Preference for Funds less than $1 billion
Generation
Fourth generation or earlier institutional funds
Assets Under Management
Firms that manage less than $2 billion

Manager Criteria

Richwood targets US managers and operators with, but not limited to, the following attributes:

  • Attributable track record within target strategy
  • Investment teams with history of working together
  • Principals known in the investment community and are positively referenceable
  • Availability of co-investment opportunities
  • Strategic alignment of interests
  • Specialized skills, good at what they do in their market

PERFORMANCE ADVANTAGES TO EARLY ACCESS-Richwood US Fund Manager Strategy

The potential performance advantages of investing early in a manager’s life cycle have been documented through academic research.  

In his 2012 paper, “Performance of Private Equity Real Estate Funds,” Ilkka Tomperi, Ph.D., Investment Director, Real Estate for Varma, found an inverse correlation between fund size and performance, as represented by the median internal rate of return (IRR).

Here we have utilized a similar methodology with updated data from the same Preqin database of private real estate fund returns to demonstrate that the results continue to hold for a more recent time period.  

As the Fund sequence number increases, so does the average fund size. Meanwhile performance, as represented by the median IRR, trends downward.

Exhibit 2: The Rewards of Investing Early

As of June 30, 2018

Average Fund Size ($MM) $1,250

Source: Preq. For illustrative and discussion purposes only. Past performance does not guarantee future results.

Investment Focus

  • Target types of investments:
    • Fund commitments (partial, JV entity)
    • Co-investments
    • Fundless sponsors
    • Joint ventures
    • Seeding arrangements
    • Direct Property Investments
    • Separate Accounts
  • Primarily U.S. based investment strategies

ESG Focus & Responsible, Sustainable Investing

We seek out managers with ESG best practices, which includes having an ESG policy in place and a dedicated ESG specialist. We want ESG incorporated into the decision-making process, we look at whether the manager targets projects with LEEDS ratings [environmental assessments] and so forth.

© 2020 Richwood Capital Partners Asia Ltd.