Opportunities in the U.S. Small-Cap Private Equity Market: The Cordish Approach

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Large leveraged buyout and mega-cap deals frequently appear in the news but much less is known about small-cap private equity deals. U.S. small-cap private equity managers have, on average, consistently outperformed U.S. mega-cap managers over 10-, 15-, and 20-year periods, according to Cambridge Associates in a report dated March 2017. In addition, private equity fund manager’s performance varies significantly so access to top managers is critical to generating investment returns (see Figure 1 and 2). Jonathan Sinex, Managing Director of Cordish Private Ventures, the family office and investment division of The Cordish Companies, and a Managing Director of Cordish Dixon Private Equity Partners, shared these insights with the Carey Private Equity and Venture Capital Club on November 8, 2017.

Figure 1: Private Equity Performance

Source: Cambridge Associates, Cordish Dixon

 

Figure 2: North American Managers Market Benchmarks

Source: Preqin Performance Analyst, Cordish Dixon

These insights form the basis of the main investment thesis of Cordish Dixon Private Equity Partners (CDPEP), a joint venture between Cordish Private Ventures (CPV) and Dixon Advisory & Superannuation Services Limited of Australia, with a mandate to continue CPV’s strategy of investing in U.S.-based small cap managers and non-control investments in U.S.-based small and lower-middle market founder and family-owned businesses seeking growth capital. CPV, on the other hand, focuses on active direct investments where there are synergies with the rest of the Cordish portfolio companies.

Jonathan gave an overview of the CDPEP and CPV platforms and shared the impressive returns the funds have generated. CDPEP’s U.S. Select Direct Private Equity Fund was selected by Preqin as one of the top 5 “Buyout Funds to Watch (Vintage 2015-2016).” In partnership with Goode Partners, in 2014, CDPEP acquired a majority stake in La Colombe, a leading coffee roaster, distributor, and retailer. Some of the key value creation initiatives included the opening of new retail units and establishing a pipeline of additional units, continued strong growth in wholesale and e-commerce, upgraded financials systems and back office infrastructure, and an enhanced management team. La Colombe’s strong growth attracted the attention of Hamdi Ulukaya, Founder and CEO of Greek yogurt company Chobani who bought the company in 2015 and provided CDPEP with a swift exit in less than a year.

Kelvin Fu
Kelvin Fu

Kelvin Fu is Vice-President at Interprise Partners (http://www.interprisepartners.com), a private equity firm focused on growth companies in the Mid-Atlantic Region. He is also a Partner at A-Level Capital, the student-led venture capital firm focused on providing early stage investments across the Johns Hopkins University ecosystem that includes student, alumni, and faculty-run companies. Kelvin is the Founder of the Johns Hopkins Private Equity and Venture Capital Club, which is one of the most active student clubs that organizes educational seminars, competitions, and networking sessions. Kelvin was based in Singapore and Shanghai and worked for one of the largest foreign-owned private equity growth funds. He has worked on numerous deals spanning across consumer related sectors, energy, and healthcare in different geographic regions such as North Asia, Southeast Asia, and Europe. He graduated from the Johns Hopkins Carey Business School with a MBA and Macquarie University with a Masters of Applied Finance. He also studied Political Science at the National University of Singapore and Technopreneurship in Fudan University, Shanghai, China. Email: k@kelvinfu.com. Website: http://www.kelvinfu.com

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