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PRINT THIS PAGE Institutional Investor Profile: Rupert Montagu, Co-Founder and General Partner, Montagu Newhall23/07/2008. Source: AltAssets. 
Rupert Montagu on fund and direct investments in the venture capital space, on opportunities in the secondaries market and on the challenge of finding venture fund managers who really do add value to their portfolio companies.  Montagu Newhall is a venture capital-focused fund of funds manager. The firm was founded in 2000. Its eight investment professionals are based in both the UK and US.
Montagu Newhall currently has approximately $910m under management for both fund and co-investments in the US, Europe, Israel, China and India. Montagu co-founded the firm with Ashton Newhall and was previously at Altius Associates.
What type of investments do you look for?
'Our strategy has not changed since we last spoke with AltAssets for an LP profile in September 2004. At least 75 per cent of our assets are allocated to venture capital funds and up to 25 per cent is reserved for direct investments. Of the 75 per cent that we allocate to funds, approximately 80 per cent is allocated to top tier venture capital firms. The remaining 20 per cent is allocated to emerging or up-and-coming managers who are raising funds or who are spinning out of established venture capital firms.
We have a sector-focused strategy of one third IT, one third communications and one third healthcare and life sciences. From a geographical standpoint, about 85 per cent of our capital is invested in the US, the rest in Europe and a little in Israel and an increasing but still small amount in China and India.'
How many private equity managers do you have in your portfolio?
'We have relationships with about 25 fund managers, many of whom we have invested with more than once. We try not to go much higher than 25 because if you spread yourself across too many managers your returns might begin to suffer. It is better to be in the top quartile in this industry.'
How many funds have you raised?
'We have closed three venture capital funds of funds to date.'
Do you invest directly?
'We have a direct investment portfolio. At the beginning, we invested up to 20 per cent of our funds in direct investments. Over time we have increased that to 25 per cent. Our direct investments are co-investments alongside the funds in our portfolio. We do not do other direct investments, just co-investments, and with a focus on later stage deals.'
What is your typical bite size?
'Our fund commitments range from $7m to $15m. The commitment is smaller when made into funds run by emerging managers and larger when made into more established firms.
We have good venture capital managers in our portfolio and that is why we have increased the size of our investments into venture capital funds. Our direct investments range from $3m to $8m.'
How does your investment process work?
'It is extremely detailed and we do all the usual due diligence. Many of the venture capital managers we invest with have an accelerated fundraising process. So we have to be flexible and quick if we do not want to miss out on good opportunities.
One benefit of having a co-investment strategy is that we are able to stay close to the managers in our portfolio. We know the firms well, the partners and, most importantly, the underlying portfolio companies. That helps us make decision fairly quickly when needed.'
What do you look for in a good private equity manager?
'We want to see a lot of experience in terms of track record and operating experience. The venture firm should also have good deal flow. We try to identify venture firms which have actually added value to their portfolio companies as opposed to those who only say they do. It is fairly easy to find this out, simply by speaking with the portfolio companies.
Succession is another important factor for us.'
How many investments do you intend to make over the next year?
'That is always a hard thing to know as we tend to be opportunistic in our approach. We never know precisely who is going to be raising a new fund over the next year. However, in the coming year we expect to make about eight fund commitments and four or five direct investments.'
How do you find out about good investments?
'On the co-investment side, we are very proactive with our managers. We have developed strong relationships with a number of venture capital firms and our strategy has become even more proactive over time.
On the funds side, we know which managers the top performing ones are and we want them in our portfolio. When it comes to new and emerging managers, we find that we just have to keep our ear to the ground and use our networks in the industry. We often hear about these opportunities very early on.'
In general, what is your appetite for first-time funds?
'There are investors out there who categorically say no to first-time funds but we think that is not the right strategy. We will certainly do first-time funds. Having said that, we are even more careful and selective with first time funds than with other funds. Our preferred first-time fund would be a spin-out situation.'
What is your interest in the secondaries market?
'We think that there are good investment opportunities in the secondary market and we have always been open to making secondary investments both at fund level and direct investments. We feel the number of opportunities in the secondaries market is going to increase over the next few years and we expect to be more active in this area.'
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