Venturi Wealth Management, an Austin, Texas-based registered investment advisory firm that manages $1.2 billion, is starting its own private equity business and launching a $100 million fund for its clients.
To oversee the new fund as the firm's senior managing director of private equity, the RIA hired Jim Kozlowski, a private equity veteran who co-founded TGF Management and has overseen the investment of more than $700 million in 47 middle-market companies. Kozlowski is a a longtime private client of Venturi co-founder and CEO Russ Norwood.
Most of Venturi's approximately 200 clients are entrepreneurs and executives who tend to gravitate toward private investment opportunities. But the largest private equity funds have struggled to add value relative to their performance and layers of costs, Norwood said. Funds at companies like Blackstone and Carlyle "have to go after mega transactions" and there is a lot of money competing for those deals, which can hamper returns, Norwood added.
“People are not getting what they are paying for,” Norwood said. “When you go into the small- or mid-market, the returns are better, and correlations are less."
Since its founding in 2015, Venturi has raised $50 million from clients for its Venturi Investment Partners (VIP) fund that has invested in cookie delivery service Tiff’s Treats, watch strap maker Barton Watch Bands and the beverage company Clean Cause.
But hiring Kozlowski and launching the Venturi Investment Partners II (VIP II) fund will enable more Venturi clients to participate in deals and diversify their portfolios. The fund, which doesn't have a name, will focus on mid-sized companies in Texas and the Southwest with revenues from $15 million to $100 million. It expects the average investment will be between $5 million and $10 million in both management buyouts and profitable, growing companies. There is already about $35 million committed to the fund, which is structured to grow up to $150 million, Norwood said.
“We wanted to be closer to the money and we wanted to have a regional or local-focused effort. We’ve dubbed it the farm-to-table approach for private equity,” Norwood said.
Norwood said the new fund is a differentiator for the RIA. Clients are charged a management fee to cover the administrative and personnel costs associated with running the new fund.
“Our clients get it. We’re not going to make any money on the management fees. We don’t make any money if the client doesn't make money,” he said.
It is rare for an RIA to launch its own private equity funds. But those that do seem to be growing faster than others. In 2017, private equity firm executives Eric Becker and Avy Stein co-founded Cresset Capital Management, a Chicago-based RIA that manages private investments for its clients. The wealth manager attracted more than $3 billion in client assets in just its first year.