Five years ago, Clinton P. Harris and three partners organized Wellesley, Mass.-based Grove Street Advisors LLC like no other private equity gatekeeper had been organized before. After 13 years as founder and managing director of Advent International Corp., an international private equity advisory firm, Mr. Harris and his partners felt they could change the concept and style associated with traditional gatekeepers by serving only a few large clients with dedicated funds of funds, while giving the large players access to top-tier venture capital funds.
One month after opening shop in May 1998, the firm was hired to manage a total of $350 million for the California Public Employees' Retirement System. The firm now manages $2.8 billion for CalPERS in three captive funds of funds, which have posted a total annualized loss of 18% since January 1999, according to the CalPERS website. Mr. Harris said only $847 million was drawn down as of Sept. 30, including $100 million for general partner fees and expenses, so it will be three to four more years before the three funds will show will be meaningful performance numbers.A few other institutional investors are betting on Grove Street's big idea, including the $32 billion Oregon Public Employees' Retirement Fund and NIB Capital Private Equity NV, a Dutch investment firm that runs $11.5 billion for the €149 billion Stichting Pensioenfonds ABP and €50 billion Pensioenfonds PGGM. Mr. Harris talked with P&I reporter Arleen Jacobius about the private equity business and Grove Street's unconventional approach.