Funds Of Fund

Fairview Capital used a razor-sharp strategic focus and high-powered talent to build a $1.6 billion private equity enterprise

SYNCOM III and one of many investors in SYNCOM IV, this is not a done deal. Fairview has already invested more than $40 million in SYNCOM. “It’s not that simple,” maintains Price. “There is a lot of due diligence we still have to do before we can make a decision.”

Fairview’s partners will have to engage in lengthy discussions with SYNCOM’s portfolio managers and review specific sectors to be held by the new vehicle. (Traditionally, SYNCOM has invested in minority-owned media and communication businesses.) Up-front research is critical in determining a profitable return on investment since it is customary that a fund’s limited partners don’t weigh heavily on investment decisions once capital is committed. Fairview, however, will probably hold a seat or two on the advisory board, as it has with the other SYNCOM funds. “Were it not for Larry and JoAnn’s impact, many [private equity] firms would not have gotten over the hurdles that this business presents. They have advised, coached, counseled, and invested in the broadcloth of the minority-focused private equity industry,” says Robert Greene, current NAIC president.

“Focusing on underserved markets is a benefit of working at Fairview Capital,” maintains partner Ed Shirley, who joined the firm in 1998 and initiated investments in black-owned Smith Whiley & Co. (No. 4 on the BE PRIVATE EQUITY list with $222 million in capital under management).

Shirley was also brought on to head a direct investment program, an option Fairview offers investors, but it hasn’t become popular. “I was to invest directly in companies alongside funds,” says Shirley. For instance, the Fairview Capital II fund invested in three operating firms between 1999 and 2000: a cable television system serving West Philadelphia; a New York-based radio station operator; and a New York-based textbook publisher. “Two did well and one didn’t.”

Although the companies were not in the tech sector, the investment period coincided with the dot-com crash. Says Shirley, “In hindsight, it wasn’t a great time to invest in individual companies. But in the next five to six years, we will be out of them and I believe we will end up doing well.”

SURVIVING THE TECH BUBBLE
Unlike other private equity funds that folded during the tech downturn, Fairview wasn’t zapped because its portfolios weren’t heavily weighted in the sector. “The good news from our perspective is that we closed the first such fund [worth $300 million] in late November of 1999,” says Morse. By the end of the first quarter of 2000 — just as the NASDAQ imploded and the tech bubble began to burst — the firm had barely committed $20 million of the fund.

As the technology venture capital space has returned to normal valuations, Fairview has placed millions in the sector. Morse says these investments have “attractive results to date.” Currently, Fairview has significant exposure to technology companies through
four of its nine existing funds. “There are going to be times when alternative investments are slow and then speed up,” explains Morse. “Our job in a lackluster environment is to pinpoint where there are opportunities.”

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