CHS Capital LLC, once one of the four leading private equity firms in Chicago, is calling it quits after it failed to raise money for a new fund.
Founded in 1988 as Code Hennessy & Simmons LLC, the firm raised its biggest fund in 2005. But the lack of investor interest in contributing to a sixth fund over the past year led partners to splinter into new firms.
The generalist approach of CHS, with its midsize funds and investments in an array of industries, has fallen out of favor with pension funds, endowments and foundations that are gravitating to smaller niche funds. CHS' mediocre returns, pulled down by a slew of investments just before the 2008 financial crisis, also hurt the firm.
“The challenges are around performance and story,” said Randall Winters, who leads Chicago-based ELK Capital Advisors LLC and provides advisory and fundraising services to investment managers. “If you are unable to raise your next fund, you are unable to survive as a firm.”
CHS tried to reorient its funds last year to focus on smaller acquisitions costing from $75 million to $300 million. But its $1 billion target for the new fund and continuing multisector focus were a non-starter with investors.
CHS managing partner Brian Simmons and partner Daniel Hennessy, who co-founded CHS in 1988 with Andy Code, decline to comment, citing federal restrictions related to fundraising for their new firms. Mr. Code, who left CHS last year to join Chicago investment firm Promus Equity Partners LLC, said he has an agreement with his former partners not to discuss CHS.
Messrs. Code, Hennessy and Simmons, who worked on buyouts in Citicorp's Chicago office, formed the firm with a big assist from Mr. Simmons' father, onetime Allegheny Ludlum Corp. Chairman and CEO Richard Simmons, who invested $3 million of his own money and persuaded Allegheny to invest $25 million.