Context in the News
Reaction To The Bank "Stress Tests" And The Perceived
Effects
November 12, 2007 - http://www.pionline.com
By Arleen Jacobius
BALA CYNWYD, Pa. — Executives at Context Capital Partners hope the firm’s approach to niche investing is as popular with institutional investors as it has been with high-net-worth clients.
The 2½-year-old private equity firm invests in other private equity firms that have distinctive investment strategies, below the radar screens of larger firms.
“Our initial investors were primarily high-net-worth individuals that are current or former Wall Street traders. They don’t want plain vanilla. They want something unique,” said Ron Biscardi, managing director and co-founder of Context Capital in Bala Cynwyd. And Context executives believe institutional investors also are interested in getting in at the beginning stages of multiflavored private equity funds.
“We started with the idea that private equity funds are difficult to get started, even for teams with a good track record,” Mr. Biscardi said.
This is not a new idea. Other firms and institutional investors take stakes in private equity firms and along with fund of funds become substantial investors in their funds. Some firms like Reservoir Capital Group, New York, not only become substantial investors but also provide front- and back-office assistance for new private equity firms.
But Context executives have taken a different approach. Context becomes a co-general partner in the firms’ funds.
“Our role is to fundraise, provide a full back office solution, and oversee the fund through our investment committee seat,” Mr. Biscardi explained.
Among its investments: BH Equity Research, San Jose, Calif., which has a private equity fund of funds and a community bank investment group, Mr. Biscardi said. A $30 million fund closed in January that invests in new community banks; Context would not disclose the mount it invested in the fund.
Now, Context and BH Equity executives are analyzing the private equity markets to better understand the viability of an institutional investment approach based on calculating the alpha produced by private equity firms, he said. Most private equity fund analysis is based on each fund’s internal rates of return along with a comparison to vintage year peers. Using alpha-based analysis, it is possible that some top quartile private equity funds are generating less alpha than other funds.
One of Context’s first investments, in January 2005, was with Titan Capital Investment Group LLC, Fort Washington, Pa., to form the $100 million Titan Loan Investment Fund LP, a private equity fund that acquires distressed real estate loans in the United States.
Context also has invested in the $30.5 million Context RV Conversion Fund I LP, which invests in high-end recreational vehicle parks and converts them from rentals to condominiums.
“We buy parks that are, in essence, country clubs. We make improvements when necessary and sell off the individual lots,” Mr. Biscardi said.
The firm spun off from investment bank Context Cos., also in Bala Cynwyd, in 2005 and took the bank’s two private equity fund investment with it, he explained. David van Adelsberg, a Context Cos. co-founder, helped to found Context Capital. It was an amicable split because the other bank executives preferred to stick with the bank’s main investment banking strategies such as mergers and acquisitions work, Mr. Biscardi said.
“We look for firms that are interesting, that have a niche and limited competition,” Mr. Biscardi said.
BALA CYNWYD, Pa. — Executives at Context Capital Partners hope the firm’s approach to niche investing is as popular with institutional investors as it has been with high-net-worth clients.
The 2½-year-old private equity firm invests in other private equity firms that have distinctive investment strategies, below the radar screens of larger firms.
“Our initial investors were primarily high-net-worth individuals that are current or former Wall Street traders. They don’t want plain vanilla. They want something unique,” said Ron Biscardi, managing director and co-founder of Context Capital in Bala Cynwyd. And Context executives believe institutional investors also are interested in getting in at the beginning stages of multiflavored private equity funds.
“We started with the idea that private equity funds are difficult to get started, even for teams with a good track record,” Mr. Biscardi said.
This is not a new idea. Other firms and institutional investors take stakes in private equity firms and along with fund of funds become substantial investors in their funds. Some firms like Reservoir Capital Group, New York, not only become substantial investors but also provide front- and back-office assistance for new private equity firms.
But Context executives have taken a different approach. Context becomes a co-general partner in the firms’ funds.
“Our role is to fundraise, provide a full back office solution, and oversee the fund through our investment committee seat,” Mr. Biscardi explained.
Among its investments: BH Equity Research, San Jose, Calif., which has a private equity fund of funds and a community bank investment group, Mr. Biscardi said. A $30 million fund closed in January that invests in new community banks; Context would not disclose the mount it invested in the fund.
Now, Context and BH Equity executives are analyzing the private equity markets to better understand the viability of an institutional investment approach based on calculating the alpha produced by private equity firms, he said. Most private equity fund analysis is based on each fund’s internal rates of return along with a comparison to vintage year peers. Using alpha-based analysis, it is possible that some top quartile private equity funds are generating less alpha than other funds.
One of Context’s first investments, in January 2005, was with Titan Capital Investment Group LLC, Fort Washington, Pa., to form the $100 million Titan Loan Investment Fund LP, a private equity fund that acquires distressed real estate loans in the United States.
Context also has invested in the $30.5 million Context RV Conversion Fund I LP, which invests in high-end recreational vehicle parks and converts them from rentals to condominiums.
“We buy parks that are, in essence, country clubs. We make improvements when necessary and sell off the individual lots,” Mr. Biscardi said.
The firm spun off from investment bank Context Cos., also in Bala Cynwyd, in 2005 and took the bank’s two private equity fund investment with it, he explained. David van Adelsberg, a Context Cos. co-founder, helped to found Context Capital. It was an amicable split because the other bank executives preferred to stick with the bank’s main investment banking strategies such as mergers and acquisitions work, Mr. Biscardi said.
“We look for firms that are interesting, that have a niche and limited competition,” Mr. Biscardi said.