SUMMARY

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Goodhart, through the Volunteer Park Capital strategy ("VPC"), provides financing to GPs. 

 

These GPs are successful firms that have built valuable businesses and have valuable assets that are expected to generate significant cash flow in the short to medium term.

 

However, due to the capital requirements of these businesses, and the long-dated nature of their economics, many GPs are in need of cash to finance near-term commitments. Even profitable small private capital managers have difficulty arranging financing.

 

Given the vast number of GPs in search of financing in the small to low-mid market, VPC was established to provide capital to these valuable but cash-short private capital GPs.

OUR GP FOCUS

VPC focuses on established GPs that typically have raised two or more funds with total assets under management ranging from $500 million to $3 billion. Many established GPs remain small for a reason, focusing on niche, capacity-constrained strategies.

VPC will consider GPs managing funds in any geography, strategy or category of private equity and private debt investing.  As well as private equity and private debt firms, VPC will consider investment advisory firms managing distressed credit, private infrastructure, real estate, and real asset strategies on behalf of their clients.

 

VPC will not consider investments in hedge fund advisors, or advisors primarily managing long-only, open-ended investment vehicles. VPC does not seed new GPs.

GP FINANCING DEALS

VPC's GP Financing transactions are secured by expected cash flows from specific existing assets of a GP. These assets (“the Collateral Assets”) typically include:

MANAGMENT
FEE REVENUES
contractual from
existing funds
GP INTERESTS
in existing funds
managed by the GP
CARRIED
INTEREST
expected from
existing funds

VPC’s economics are typically gained through redeemable senior preferred interests of the assets, and may be supported in the down-side case by a guarantee from the firm/management company.

 

The redemption of the interests is based on the achievement of the greater of an IRR or MOIC hurdle. These transactions have a finite life, which is expected to be two to four years. These transactions are too small for conventional lenders and not of interest to larger “GP Stakes” investors.

 

VPC works exclusively in the small GP space, where these opportunities are available.  

BENEFITS TO THE GP

VPC strongly believes these deal structures offer GPs a non-dilutive and non-permanent solution that allows them to leverage their existing business to fund future capital needs.

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Self-liquidating securities

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Capital without selling
future value creation

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Termless structure

USE OF PROCEEDS

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GP COMMITMENT FINANCING

The market demands the manager commit significant capital alongside their clients into the funds they manage. Many managers already have a vast amount of their wealth locked up in the funds they manage (and the value of the businesses they have created).

VPC's investment in the management company can help managers meet their GP Commitment requirements, while maintaining manager-investor alignment.

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GROWTH CAPITAL

With a great deal of capital locked up in the business, small investment firms can struggle to fund growth. To be perceived as “institutionally viable”, a boutique may require a more robust infrastructure, additional investment and support staff, and a well-capitalised business.

 

Boutiques that have successfully deployed initial funds may desire to expand their product offering into complementary strategies.

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SUCCESSION PLANNING

Surviving past the retirement of the founding partners can be difficult for private capital boutiques. The complexity comes from the large impact of key people, founder entitlement to ongoing equity, and the next generation lacking the means to "buy-out" the founders.

 

As a third party, VPC can alleviate complexity and facilitate agreement by bringing capital and neutrality to the discussion. 

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REFINANCING

Boutiques may also have seed/passive investors owning long-term equity economics, or have existing debt facilities that they prefer to refinance. The proceeds from VPC's investment may in some cases by used the manager to finance these recapitalisations also.

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