Ex-Wilshire Associates Banker Forms New Consulting Practice
WALL STREET WEST
Stephen Nesbitt, the longtime managing director at Wilshire Associates, has formed his own investment-consulting firm, Cliffwater LLC, with three other ex-Wilshire Associates executives.
Though Nesbitt will continue to advise large pension funds and endowments, this time he is focusing on the fast-growing class of alternative investments and its four distinct avenues of growth: private equity, hedge funds, real assets and real estate.
“I didn’t want to rewind and do the same thing all over again,” said Nesbitt, a principal at the firm. “So we decided to carve out a piece of the market rather than bite off the whole apple.”
Cliffwater’s three other principals are Barbara Smith, a former managing director at Wilshire, and Katherine Barchick and Dennis Sugino, both former senior managers.
Cliffwater became registered last month with the Securities and Exchange Commission as an investment advisor and recently signed its first client, Nesbitt said.
Nesbitt left Wilshire in March after a corporate reorganization stripped him of his consulting responsibilities. However, he denied the reorganization was a factor in his departure, as the company had claimed.
“Most of our departures had nothing to do with management changes, that was not correct,” he said. “Basically if you look at most small to medium-sized companies, when you have people leave, a lot of it has to do with their desire to have more ownership, a bigger stake in the company, and more control,” he said.
Seven top managers at Wilshire have left the company since the SEC launched a wide probe into the mutual fund industry.
The SEC is looking at whether consultants who recommend certain money managers to institutional clients are favoring those money managers who also purchase their consulting services.
While Wilshire Associates has not been implicated, its chief executive, Dennis Tito, has separated the firm’s money management and consulting units to avoid the appearance of any conflict of interest.
In a separate matter, the SEC is looking into whether Wilshire engaged in improper trading activity.
Kim Shepherd, a spokesman for the firm, declined comment.
The city of Los Angeles raised $365.4 million last week in the third and final series of general obligation bonds to construct several new police stations and emergency operation centers, several in the San Fernando Valley.
Bond measure Q was approved by voters in March 2002 to fund the relocation of fire dispatch and emergency operations from City Hall, and pay for two new bomb squad facilities and the replacement of four police stations including the scandal-plagued Rampart division. At least one new police station and two new jails also will be built.
Two previous rounds of financing in 2002 and 2003 raised $155 million and $70 million, respectively, to purchase land and design the facilities.
“We’d love to build everything all at once but that’s just not feasible,” said Marla Bleavins, a finance specialist in the city’s chief administration office. “It’s a pretty large acquisition program and land acquisition is a challenge because empty land in Los Angeles is hard to come by.”
The bonds, which carry a 5 percent coupon, were purchased for yields ranging from 2.15 to 4.20 percent, according to Bloomberg News. The bond auction was won by Merrill Lynch & Co.
Both Moody’s Investor Service and Fitch Ratings, two bond agencies, rated the general obligation bonds “AA,” the third-highest investment grade, based on the city’s strong property and utility tax receipts.
John Owens, managing director of the western region municipal bond desk at UBS Americas Inc., said the bonds were snapped up by property and casualty insurers and trust departments of large institutions.
Last month, the Los Angeles City Council voted unanimously to place a half-cent sales tax on the November ballot to hire 1,600 more police officers and expand gang intervention programs. It would raise the sales tax in Los Angeles to 8.75 percent.
Currently, the city of Los Angeles faces a $293 million budget gap for fiscal 2005, out of a total general fund revenue base of $3.5 billion, according to Moody’s.
Adelphia Communications Corp., the bankrupt cable giant that controls a prime piece of the Los Angeles market, has hired investment bankers at UBS Americas Inc. and Allen & Co. to manage the auction of its assets.
While the company was expected to sell in one piece, analysts have speculated that Adelphia could be broken up into two to four pieces and sold later this year for more than $20 billion.
Cable giants Time Warner Inc., Comcast Corp. and Cox Communications Inc. are widely viewed as the most likely bidders for pieces of Adelphia, which could radically transform the cable industry.
In a recent interview with Dow Jones Newswires, Comcast Chairman and Chief Executive Brian Roberts suggested that Comcast could sell its 21 percent stake in Time Warner’s Time Warner Cable division to purchase Adelphia’s crown jewel its Los Angeles franchise, with 1.2 million subscribers primarily on the Westside.
Los Angeles can expect to see a pick up in venture capital funding for technology, communications and software companies in the second half of 2004.
“The technology sector is beginning to warm up, which should bode well for the L.A. community,” said Don Williams, the Pacific Southwest venture capital group leader at Ernst & Young.
Many tech companies are getting add-on rounds of funding from existing investors.
FrontBridge Technologies Inc., an anti-spam e-mail protection firm in Marina del Rey, received $10 million in a “series-D” round of venture capital funding in the second quarter. Its main investors include Focus Ventures in Palo Alto, Sierra Ventures in Menlo Park and BA Venture Partners in Foster City.
CinemaNow Inc., an online movie download service, raised $11 million in a new round of funding from Mellon Ventures in Menlo Park, Cisco Systems Inc. and existing investors including Lions Gate Entertainment, which already owned a 54 percent stake in the company.
In the second quarter, 15 Los Angeles-based companies raised $123 million in venture capital funding, compared with 18 companies that received $199 million in venture funding in the first quarter, according to a survey released last week by Ernst & Young and VentureOne. However, funding levels are up 20 percent from the first half of 2003 to $322 million, compared with $269 million in the first half of 2003.