SOURCE: Triton Pacific Capital Partners

October 15, 2008 12:27 ET

Triton Pacific Capital Partners Embraces Non-Institutional Investors Looking to Tap Into Private Equity

Turbulent Public Equity Market Makes Case for Private Equity Investments

LOS ANGELES, CA--(Marketwire - October 15, 2008) - Turbulence in the world's investment and credit markets continues to take its toll on consumer confidence. Coupled with bank failures, high fuel prices and the prospect of high inflation, these ongoing threats to the global financial system are driving conversations across political, economic and social boundaries. Volatility conscious retail investors in traditionally dependable areas such as blue chip U.S. equities are facing the very real possibility that this core part of their portfolio may end the decade with little or no positive return at all. Fixed income, once the safe haven for more conservative investors has also come under pressure due to uncertainty in the bond markets, and balanced investing merely blends these currently unstable asset classes.

Yet, some large institutional investors like the endowments of Yale University and Harvard University seem to thrive through good and bad markets, having produced solid double digit gains year in and year out. Los Angeles-based private equity firm Triton Pacific Capital Partners, LLC believes that there may well be a lesson on investment strategy that these institutions of higher learning can share with the broader investing public.

Private equity investing, specifically the kind of buyouts employed by investment firms such as Carlyle, KKR and Blackstone, have long been viewed by institutional investors as a solid addition to traditional public market investments. Though certainly under more scrutiny in recent times, this asset class has proved to be the cornerstone of the "absolute return" portions of institutional portfolios focused on the longer term.

The investment performance of private equity over the past two decades has handsomely rewarded investors who saw the wisdom of this allocation. This opportunity comes with the acceptance of, rather than the avoidance of two risks that most investors have been told to avoid at all costs: liquidity risk and non-systematic or business risk. Ironically, one of the "costs" of staying clear of this risk was to forgo significant rewards as well.

"While financial advisors to most non-institutional pools of money have done an effective job of focusing investors on the prudent avoidance of unnecessary portfolio risk and adoption of a more balanced traditional allocation of assets, this philosophy often exacts a financial toll," stated Kirk Michie, director of investor relations for Triton Pacific Capital Partners. "Formulaic allocations of traditional portfolios between stocks and bonds, while defensible academically, might actually prove to have been detrimental to wealthy investors." Michie goes on to assert that "private equity investments, once out of reach for the non-institutional investor, are today more accessible and can provide dependable and robust returns for high net worth families."

Triton Pacific readily acknowledges that while not appropriate for everyone, many investors with at least $3 million of portfolio assets may be able to prudently allocate up to 20 percent of their long term capital to this asset class. The firm believes that private equity investments can significantly enhance more traditional portfolios by generating robust returns. Indeed the firm puts its money where its mouth is by being one of the largest investors in its portfolio of 14 companies. In fact, all of Triton Pacific's key employees have committed significant portions of their net worth to this asset class.

"Many wealthy families understand this dynamic because building and selling a small to mid-sized business is the source of their current wealth," said Michie. "Adding value to already successful businesses at the operating level can be a real driver of growth and value creation. This is the beauty of operationally focused private equity firms."

Providing Access

Typically, investors with assets in the $5 to $30 million range are challenged by limited access to private equity, as traditional buyout funds are reserved for institutional investors with much larger portfolios, greater sophistication and longer time horizons for investment. However the landscape is changing, and now some private equity firms like Triton Pacific have focused on lower middle market buyout targets (under $50 million of company revenues), and raise funds either on a deal-by-deal basis (often referred to as fund-less sponsors), or through smaller funds with lower investment minimums. Much of their loyal investor base comes from directly courting relationships with individual high net worth investors and their advisors.

Embracing the Non-Institutional Investor

Some of these more accessible funds provide access to investors at levels as low as $150,000 and are available through registered investment advisors and independent broker dealer firms. Often times it is the former small business owner and "mid-tier millionaire," either directly or through his or her advisor that has just the right mix of sophistication and asset level to make for an ideal investor in this end of the private equity market. This covers a pretty large segment of those mid-term millionaires, and for those willing to do their homework on finding the right firm or the right advisor, the rewards can be truly substantial. When that unique set of circumstances converges, these individual investors can leverage some of the advantages typically reserved for larger institutions.

The risks involved with investing in alternatives like private equity, given the lack of liquidity, long time horizon and sometimes high fees should not be taken lightly however. Michie adds some good advice for both large and small investors, "Do your homework and make sure that you understand the stage, capitalization, leverage, holding period, and structure of your commitment to private equity along with the backgrounds and track records of the principals you are considering for investment."

About Triton Pacific

Founded in 2001, Triton Pacific Capital Partners, LLC, with headquarters in Los Angeles, California, is an established private equity firm that acquires controlling interests in profitable entrepreneurial companies. Triton Pacific was recently named to the 2008 Inc. 5000 as one of the fastest growing private companies in the U.S. Ranked as the 54th fastest growing financial services firm in the country, Triton Pacific has more than tripled its holdings over the past five years. The company seeks to partner with management of established, profitable companies that have compelling, differentiated business propositions. Through its Value Enhancement Program(SM), Triton Pacific employs its time-tested business model in conjunction with a well-developed arsenal of proprietary in-house resources. The firm is able to offer its portfolio companies growth capital, strategic guidance and operational expertise designed to enable companies to professionalize their businesses with the ultimate goal of accelerating growth and maximizing value. Today, Triton Pacific maintains a controlling investment in 14 private equity companies with an enterprise value in excess of $160 million. More information can be found at www.tritonpacific.com.

Contact Information

  • Media Contact:
    Bob Menzies
    Lages & Associates
    (949) 453-8080
    Email Contact