Investment fund manager and structured investments innovator Larry Goldfarb is launching a new institutional fund, BayStar Ventures LLC.
The fund, which will have offices in New York and California, will invest primarily in privately negotiated transactions in public companies with a typical investment time frame of two to five years.
Goldfarb will be winding down, and departing from, BayStar Capital, but will maintain a supervisory role to ensure all investors' interests are fully protected.
Investors in BayStar Ventures will include a number of the same people and entities that have backed Goldfarb throughout his investment career.
The new fund will focus on micro- and small-cap public companies in the technology, media, telecommunications, life sciences and industrial sectors, where Goldfarb and his new partners have substantial experience and can add significant value as active shareholders. The investments will be based on a fundamental view of the company, but will typically involve senior convertible instruments and, when appropriate, active hedging strategies.
"Hedge funds are increasingly trying to put much larger amounts of money into the same strategies," said Goldfarb. "As a result, performance is declining, and the approach of maintaining returns by increasing leverage is once again proving highly risky. BayStar Ventures will focus on an under-followed and under-invested sector - the micro- and small-cap companies that have good potential, but few financing options. We will approach them as long-term, fundamental investors, without the shackles of an artificial, month-to-month performance fixation. Combined with our various hedging strategies and the use of senior convertible instruments, this gives the potential for venture capital-like returns with much less risk. We have assembled a team of industry veterans with the expertise and relationships to source, execute and make these deals happen for our investors."
Joining Goldfarb as Managing Partners are:
• James Peet, formerly with Lehman Brothers where he raised and ran the Lehman Brothers Communications Fund, an USD 800 million fund focused on emerging communications service providers. Prior to that, Peet was a principal of The Chatterjee Group, a Soros Funds affiliate, where he first worked with Goldfarb.
• Bob Rice, Chairman and Founder of Viewpoint Corporation, a major provider of Internet technologies and services, and member of the New York Angels. Prior to becoming a technology entrepreneur, Rice was a partner at Milbank, Tweed, Hadley & McCloy, where he and Goldfarb worked together structuring novel financial instruments.