top-performing private equity funds. “We’ve achieved 20.7% net [investment return],” exclaims Nappier. Connecticut has since invested another $200 million with the firm to launch Constitution Fund II.
In one strategic move, the financiers boosted their capital under management by more than 77%. By December 2004, Fairview had nine funds and capital under management of $1.6 billion — a feat unsurpassed by any other BE private equity firm or many majority firms, for that matter. According to the National Venture Capital Association, a large private equity fund manages between $500 million and $1 billion in capital.
This crowning moment represents the culmination of years of planning, hard work, and solid investment performance. Price and Morse have propelled Fairview from a small firm to a major player in the $300 billion private equity arena. For this, Fairview Capital has been named the 2005 BLACK ENTERPRISE Financial Company of the Year.
A CLASS OF THEIR OWN
To fathom the significance of Fairview’s achievement, you have to understand the private equity business. Firms raise money from public and private pension funds, corporations, wealthy individuals, and endowments to finance a fund that, in turn, invests in privately held companies, ranging from startups to established entities. In this arrangement, the firm usually serves as the fund’s general partner while investors hold limited partner status. The fund receives healthy profit participation and reaps even greater proceeds during the exit stage of the investment when a company is usually acquired by a larger corporation or goes public.
What makes Fairview Capital unique among private equity firms is that it operates as a fund of funds. It doesn’t directly invest in startups or established companies but allocates investment dollars to other venture capital funds and private equity firms. Fairview is one of 150 such firms in the nation and is one of only four that invest primarily in emerging markets, which are classified by ethnicity, gender, or sectors, like technology, with potential to generate huge returns. In fact, Fairview was one of the first private equity firms to create a fund of funds focused on ethnically diverse and underserved markets. To date, Fairview has committed $350 million to this area and has capital invested in seven BE private equity firms, including Opportunity Capital Partners (No. 7 with $135 million in capital under management), Provender Capital (No. 6 with $145 million in capital), and ICV Capital Partners (No. 8 with $130 million in capital). Fairview’s portfolios, typically capitalized at $300 million, reflect a range of industries including technology, communications, healthcare, and life sciences.
“When putting the Fairview Capital concept together, we felt that to get traction with institutional investors and pension funds, it was very important to build credibility,” explains Price. “We felt we needed to have a strategic relationship so when we went to the market we could say we had a well-known partner. We approached several existing fund of fund firms, and Bigler was the one interested in being a part of this new venture.”
In 1994, Fairview Capital set up shop in BIMC’s Farmington,