Whitney & Co. Prep Fund Launch, Target $2B –

STAMFORD, Conn. – Whitney & Co. planned to launch its fifth fund, the $2 billion-targeted Whitney V LP, in the late summer or early fall, said Peter Castleman, the firm’s chairman. The firm expects a late-fall close for the vehicle.

Whitney focuses on five sectors: communications, health-care, information technology, financial services and those industries undergoing transformation as a result of market shifts and technological innovation.

With capital resources double the size of its previous vehicle, the $1 billion Whitney IV LP, the firm will be able to take larger stakes in its investments. With Fund V, Whitney plans to invest an average of $35 million to $50 million over several rounds in about 30 to 35 companies, which will be part of the firm’s core portfolio, Castleman said.

Whitney also makes secondary, or development investments, which each averaging less than $5 million, he said, adding that the firm refers to this type of investing as “feeding the stars.” As these entities grow, the firm considers pouring more capital into each company, phasing them into the core portfolio, he said.

Whitney makes “growth capital” investments, which fall somewhere between traditional venture deals and buyouts. The firm abides by a “top down, bottom up” strategy: Identify themes, or attractive areas of investment, and then find the companies that can execute those strategies, Castleman explained.

At press time, the firm’s previous vehicle was almost completely invested, Castleman said. The firm started investing Fund IV last summer and has backed about 35 core companies with average investments of about $20 million, as well as about 25 secondary companies, he said.

The firm’s portfolio includes companies such as SpectraSite Communications Inc., which went public in September 1999, TeleCorp PCS Inc., which held an offering in November 1999, and Homestore.com Inc., which became a public entity in August 1999.

The firm’s limited partners consist of a mix of endowments, foundations, universities, pension funds, and high-net-worth individuals and families from the U.S., Europe and Asia, Castleman said. The Massachusetts Institute of Technology, Harvard University, Duke University and California State Teachers’ Retirement System have all invested with the firm.

Whitney expects most of its limited partners in previous funds to return for the new vehicle, and they will be joined by a select group of newcomers, Castleman said. Whitney prefers long-term investors who are knowledgeable about the alternative asset class and have the depth of capital to support the fund. Castleman declined to identify the firm’s carried interest structure and management fee.

Founded in 1946, Whitney manages more than $5 billion of assets out of its offices in Stamford, Conn., New York, Boston, San Francisco, London, Hong Kong, Tokyo and Singapore. In addition to VC and buyout investing, Whitney manages several hedge funds, as well as funds that invest in mezzanine debt, high yield debt, bank loans and other special situations.