Rustic Canyon GP Launches FoF

Michael Kim announced in mid-December that he is leaving venture firm Rustic Canyon Partners to launch a fund-of-funds shop called Cendana Capital.

“I look at this as moving up the food chain,” says Kim, who co-founded Santa Monica-based Rustic Canyon 10 years ago. “I’ve really enjoyed my time as a venture capitalist, but now I’ll be able to invest in the best managers across a wider spectrum of investment strategies.”

Kim says he will run Cendana with a partner, but he declined to identify the individual except to say he or she is based in San Francisco and currently manages a $2.5 billion fund-of-funds program.

Cendana was expected to begin raising its inaugural fund-of-funds early this year, with a goal of raising $250 million. It will be opportunistic in terms of investments, with no pre-determined allocations, Kim says.

“There are plenty of funds-of-funds focused on VC or focused on distressed, but we plan to be flexible and allocate on where we think the best opportunities are,” Kim says. “If that means international early stage, then that’s what we’ll commit to.”

I’ve really enjoyed my time as a venture capitalist, but now I’ll be able to invest in the best managers across a wider spectrum of investment strategies.

Michael Kim

The launch of Cendana comes at a time when many institutional investors are resource constrained or cannot deploy capital efficiently. A recent study by Casey & Quirk projects that outsourced investment assets in the United States will grow from $195 billion at the end of 2008 to $510 billion by 2012.

“Many institutional investors face significant challenges to achieving appropriate risk adjusted investment returns,” Kim says. “There is a large and growing opportunity for next-generation investors to construct optimal portfolios by better assessing risk opportunities across the entire private equity continuum.”

To achieve his goal, Kim hopes to draw upon his limited partner and general partner background. From 2004 to 2009, Kim served as a trustee at the $13 billion San Francisco Employees’ Retirement System (SFERS), where he served as a chairman of the investment committee and as president.

In launching Cendana, Kim issued a press release that quotes SFERS Executive Director Clare Murphy, who said, “Michael is a trusted advisor, and we look forward to his perspectives of the private equity world.”

Kim will continue to serve as an “advisory partner” with Rustic Canyon and transition his board seats to other firm staffers. Among the companies where Kim is a director are Dipity, maker of a widget that allows people to create and share timelines that incorporatee diverse content such as video and RSS feeds, InSync Software, a developer of software that tracks assets in real time, and TwoFish, which develops economic platforms for online games.—Dan Primack