Partners Launch $300M North Carolina Venture ‘Fund of Funds’

Three investment managers, including former directors of private investments at Duke University and the University of North Carolina at Chapel Hill, have launched a fund that aims to invest $300 million in early-stage venture funds and private equity groups.

By:
Leo John
The Business Journal of Raleigh/Durham

http://www.nasvf.org/web/allpress.nsf/pages/9309

Durham-based Parish Capital Advisors has garnered commitments in excess of $200 million from investors, according to sources. Parish Capital is set up as a "fund of funds" that is tapping large investment funds to raise the $300 million. That money then would be pumped into midsize venture funds.

Charles Merritt, a co-founder of Parish, declined to discuss the firm’s plans, citing securities regulations. "We hope (the close of the fund) will be in the fall timeframe," Merritt wrote in an e-mail response.

Parish Capital’s Web site says its mission is "to generate top tier returns for our institutional limited partners by providing unique access to select emerging venture capital and buyout funds."

Other Parish co-founders include James Mason, a former director of private investments for Duke University Management Co., where he oversaw $2 billion in private equity, and Wendell McCain, a vice president at BancBoston Ventures, where his group managed a $600 million diversified private equity portfolio.

Prior to launching Parish, Merritt was director of private investments at The Duke Endowment, a Charlotte-based nonprofit established by Duke University founder James B. Duke. At The Duke Endowment, Merritt was responsible for private equity strategy and managed about $750 million in assets.

Before that, Merritt had a similar role at UNC’s Investment Office, where he oversaw about $350 million in commitments.

Duke Management Co. has provided Parish "a working capital loan and line of credit," says Thruston B. Morton III, who is president of Duke Management.

"We do not invest in (Parish’s) fund itself because (Duke Management Co.’s) job is to do the same thing," says Morton.

Parish wants to invest blocks of money in venture capital firms that are raising their second or third funds.

"They plan to target funds in the early numerals," says Steve Nelson, a partner with the Research Triangle Park office of The Wakefield Group, a Charlotte-based venture firm.

Nelson says Parish’s strategy "makes a lot of sense." Funds that manage billions of dollars are looking to invest in venture funds but don’t want the hassle of tracking every $50 million investment. A group such as Parish Capital can track the investments for the larger funds, says Nelson.

While Parish’s scope is national, Nelson says having the firm located in the Triangle might draw attention to local startups.

The concept of a fund of funds is not uncommon. Mutual funds have funds that individuals can buy into whose sole purpose is to invest in other mutual funds. Hedge funds, which make bets on the movement of stocks, also offer investors opportunities to buy into funds that invest in other hedge funds.

However, a fund that invests in other venture funds is uncommon, says one securities lawyer who asked not to be named.

Unlike hedge funds, venture funds only accept investments during a fixed fundraising period, after which it remains closed to new money. This makes the job of a group such as Parish "more difficult," says the lawyer. "It’s a more stunted kind of opportunity."

Parish Capital was incorporated in May 2003, according to documents filed with the North Carolina Secretary of State’s Office. The group registered its first fund, Parish Capital I, in March 2004.