First Closing of Fund II
On April 27, Kline Hawkes & Co. held the initial closing of Kline Kline Hawkes Pacific, L.P., its second institutional Fund. As of this writing, we have raised approximately $150 million dollars with a target of $250 million. A final closing of Fund II is anticipated on or before September 30, 2000.
Kline Hawkes Pacific, L.P. is being organized to tap investment opportunities in the Western United States, a region that we feel is very attractive for long-term investments because of the large vibrant economies encompassed in it. The economic outlook in California remains strong. In 1996, the Golden State was home to the seventh most robust economy worldwide with a Gross Domestic Product of $963 billion Ð ahead of China, Brazil and Canada. Seattle has also been flexing its burgeoning economic might, in a recent Business Start Ups survey it placed 10th among US cities in terms of "High Tech Hot Spots." Management firmly believes that this West Coast growth will continue. Consequently, through Kline Hawkes Pacific, L.P., we are broadening our primary investment focus beyond the eight counties of Southern California, an area that has proved very lucrative for us to date.
As of March 31, 2000, Kline Hawkes California, L.P., achieved an 83% IRR on invested funds, net assets increased four fold and we enjoyed a ten fold increase on the realized portion. This performance was due in part to a number of high profile events; namely the acquisition of AboveNet Communications, Inc. (NASDAQ:ABOV) by Metromeida Fiber Network, Inc. (NASDAQ: MFNX) for MFNX stock; the merger of PaeTec Communications, Inc. with CampusLink Communications Systems, Inc. (a 1996 Fund investment); and the sale of two thirds of our position in GoTo.com (NASDAQ: GOTO) to idealab!, half in cash and half in idealab! preferred stock.
Frank Kline, Jay Ferguson and Nick Memmo began meeting with institutional investors throughout North America and Europe beginning in December 1999. "Our jobs were made considerably easier on December 13, when CalPERS, Kline Hawkes California, L.P.'s largest limited partner, committed $100 million dollars to Fund II, an increase of $55 million from their commitment to Fund I and a clear endorsement of our performance to date, a performance we intend to refine and build on in the coming years.", said Frank Kline, Managing Partner at Kline Hawkes.
The strategy of Kline Hawkes Pacific, L.P. will be to invest in and nurture strong management teams and to position management for growth. Generally, the Partnership will make investments of up to $15 million in emerging companies and the range will ordinarily be $5 to $10 million. This investment approach is based on the Partners' experience working together to source, structure and realize on investments since 1989. Heavy emphasis will be placed on management teams, a well articulated business model, overall market size, and strong growth situations.
Kline Hawkes believes that significant opportunities exist in growth companies in highly focused industry groups. Historically our major areas of interest include: Information Technology, with a focus on Internet Infrastructure, Telecommunications and Enterprise Software; in Healthcare our emphasis is on Medical Devices and e-Health; and finally we source deals in the Business Services sector including e-Commerce (Business to Business) and Outsourcing.
Kline Hawkes & Co. has developed with its officers, advisors, principals, and stable of portfolio companies, proprietary sources of transactions that are expected to further enhance the deal flow to the Partnership. The Partnership's area of investment interest represents the fastest growing segments of the American economy. This in turn enhances the potential for superior rates of return on invested capital.
For further information on Kline Hawkes Pacific, L.P., please contact one of the Partners; Jay Ferguson, Frank Kline or Nick Memmo.