Going Private

Bloomington-based Mount Yale Capital Group is certainly one of the lower-profile financial management firms in the Twin Cities. But Mount Yale has been anything but quiet when it comes to growth. Founded in 1998 and with an office in Denver, the 31-person firm is now up to $1.8 billion under management, from a mix of about 30 percent institutions and 70 percent individuals.

While Mount Yale offers its clients a full selection of proprietary investment options and total portfolio management, one of its fastest-growing businesses has been in so-called “alternative investments.” This includes a registered hedge fund, which in Mount Yale’s case is a “fund of funds” in which assets are spread over individual hedge funds of various investment styles and objectives. Most recently, Mount Yale launched a private-equity fund, putting the firm in one of the most rapidly growing investment arenas on the horizon.

As with its hedge-fund product, the firm’s private-equity assets are distributed among the nation’s largest and most established private-equity investment firms. A private-equity fund takes an ownership position when it makes its investments—it doesn’t own a whole company, but rather a percentage of it. We spoke recently with Phillip Ebner, a Mount Yale managing director and a member of the firm’s investment committee.

{Q} Why did your firm decide to offer a private-equity fund?

Many of our current clients were asking for a private-equity vehicle for their portfolios. So we knew the demand was out there; we then leveraged our relationships with a few of the larger private-equity firms and created a fund of funds.

{Q} The private-equity market has just been exploding in terms of size. What’s driving that?

In my opinion, some of the hedge funds have taken a hit and money needs to flow somewhere. I think the new, hot term, if you will, is private equity, and some investments firms are launching private-equity funds. Our clients are demanding it, both institutional and retail.

{Q} What is a private-equity investment?

A private-equity investment can be anything from a leveraged buyout to an asset play. Probably one of the biggest private-equity purchases recently was Kmart. And really, the firm that bought it bought for the land, not necessarily for the stores. They look at deals in unique ways . . . . Some of the hottest private-equity deals out there [are] coal mines, small airports. The key question is, ‘How can I make money if I were to buy a privately held company?’

{Q}   Is there any connection to the spate of regulation in the past five years, where public companies are going private and driving this market?

I think so. You look at all the Enrons of the world and all these publicly held companies that had so much trouble, and you look at all these mid-level companies that were