Funds of Funds

Our Private Equity Funds of Funds Approach 

FW Capital offers funds of funds to institutional investors, typically endowments, foundations, and pension plans. We have successfully built a network of leading private equity managers in various asset classes and our portfolio includes investments managed by teams with strong legacies in our industry, as well as emerging management teams that we believe have the potential to become the next generation of leaders in our industry. Our firm and our affiliates have managed commitments to more than 100 underlying funds.

To realize the full potential of the asset class, we believe a private equity fund of funds portfolio must be diversified across investment style (venture/buyout), geography and vintage year (time), industry/sector, investment stage (small/mid/large buyouts and early/late stage venture capital).

Our funds typically make investments across approximately 25 underlying fund investments, including secondary purchases of funds, which cumulatively may represent more than 400 investments in private companies. We believe a funds of funds portfolio is one of the most attractive options for investors with either large or small allocations to private equity.  

FW Capital's Closed Funds of Funds

Fort Washington Private Equity Investors II, L.P. (1999)

$245.2 million in committed capital; commitments to 24 underlying funds and nine direct co-investments; fully committed.

Fort Washington Private Equity Investors III, L.P. (2000)

$141.3 million in committed capital; commitments to 15 underlying funds and eight direct co-investments; fully committed.

Fort Washington Private Equity Investors IV, L.P. (2004)

$78.2 million in committed capital; commitments to 23 underlying funds and 14 direct co-investments; fully committed.

Fort Washington Private Equity Investors V, L.P. (2006)

$135.8 million in committed capital; commitments to 26 underlying funds, one direct co-investment and one secondary committment; fully committed.

Fort Washington Private Equity Investors VI, L.P. (2008)

$169.1 million in committed capital; commitments to 18 underlying funds and 1 secondary underlying fund; fully committed.

Representative Private Equity Fund Relationships

FW Capital actively maintains relationships with a diverse universe of leading private equity fund managers. Due to the depth of our existing relationships, FW Capital is often provided opportunities to invest in certain funds that may not otherwise be available to a majority of other private equity investors. In selecting funds, FW Capital looks for firms with demonstrable competitive advantage and a correlation benefit to the portfolio.

The following list is a representative sample of fund managers with which FW Capital maintains close relationships¹:

Selecting the Best Underlying Funds

FW Capital team applies a thoughtful and differentiated approach to evaluating private equity funds for investment.

First Principles

• Financial markets are mostly efficient, even in private equity
• The future is uncertain; risk controls are paramount
• Fund size can be an "enemy" of performance

Investment Philosophy

• Select funds with differentiated strategies to exploit market inefficiencies
• Diversify with non-correlated private equity investments
• Manage FW Capital total fund size to prevent dilution of best ideas

We believe our investment strategy will generate attractive risk-adjusted returns for our limited partners, while mitigating downside risk.

Our Fund Investments

In evaluating managers, FW Capital places a heavy emphasis on the principals' integrity, commitment, relevant experience, team rapport and track record. Through our disciplined due diligence process, we thoroughly examine the fund's governance, organizational and incentive structure, decision-making process and ability to source opportunities and exit at attractive rates of return. We also examine the team's demonstrated ability to build effective companies that have been proven to deliver real value.

In evaluating the strategy and investment focus of a manager, we consider the attractiveness of the sector and the team's record of taking advantage of opportunities in the target sector. We assess the team's prior funds and the size and resources of the current fund relative to prior funds. We invest in first-time funds, but not first-time private equity investors. We pay particular attention to the principals' track record and history as well as their ability to work together as a team.

Finally, we examine the terms of the partnership and the alignment of interests between limited partners and the general partners. Among other things, we consider the handling of potential conflicts, the ability for limited partners to exercise control in extraordinary circumstances, key man provisions, distribution policy, the allocation of profits and losses, transaction fees and the burden of operating expenses and fees on the fund.

We consider our philosophy of investing with managers who have demonstrated competitive advantages in our evaluation of investment opportunities, including re-investments with general partners with whom we already have a relationship.

Structuring Our Funds

At Fort Washington Capital Partners Group (FW Capital), we structure our funds of funds and allocate fund investments such that each underlying fund commitment makes up a sizeable enough position in each fund to have a meaningful impact on the overall return of the portfolio.

Portfolio construction within the constraint of our approach emphasizes balance and diversification across multiple dimensions. We believe this level of diversification, considering correlations between our fund investments, will create a balanced portfolio to effectively manage risk while not impairing returns.

Our funds typically invest in approximately 25 private equity funds to achieve balance across key diversifiers.