Bay Hills Capital Management, LLC (“BHC” or the “Firm”), a Delaware limited liability company, is a private equity fund-of-funds investment firm focused exclusively on the North American small to lower- middle market buyout sector ("Small Buyouts"). BHC was founded in 2006 and is headquartered in San Francisco, CA. As of December 31, 2019, the Firm managed $590 million in client commitments across eight fund-of-funds on a discretionary basis and no assets under management on a non-discretionary basis. BHC is managed by its two senior professionals. Lance Mansbridge is the principal owner of BHC.

BHC provides advisory services for a set of commingled funds-of-funds (Bay Hills Capital Partners I, II, III and IV or collectively, the “BHCP Funds”) and separate account funds-of-funds (Bay Hills Emerging Partners I, II, II-B, and III or collectively, the “BHEP Funds”). The BHCP Funds and BHEP Funds are collectively referred to as the BHC Funds (the “BHC Funds”). The BHCP Funds are private equity funds- of-funds established to invest exclusively in hard-to-access Small Buyout funds managed by top-performing, well-established firms targeting the Small Buyout sector in North America. The BHEP Funds are committed to proactively identifying emerging managers in the Small Buyout segment. Emerging managers are typically less-established firms with experienced management teams that have spun out from more established private equity firms. These managers are typically raising their first or second institutional fund, and have a strong pre-fund track record.

As the investment advisor to the BHC Funds, the Firm provides investment identification, evaluation and selection services. Additionally, the Firm negotiates investment terms and provides on-going due diligence and performance monitoring for each BHC Fund and its investments. Investments in private equity are made primarily in pooled investment vehicles structured as limited partnerships. Although BHC serves as the investment advisor to all BHC Funds, each fund is structured to have a distinct general partner responsible for the daily operations of the respective fund, and each general partner is an affiliate of BHC.

With the BHEP Funds, BHC has tailored its advisory services to the needs of a sole investor, and has developed specialized fund vehicles to serve those needs. BHC has addressed the investment objectives of the client through the creation of a detailed investment plan with specific guidelines regarding the total commitments from the client, the target number of partnership investments for the vehicle, the commitment size to each partnership, diversification requirements, investment restrictions, and fee structures. BHC’s investment discretion over the BHEP Funds is limited by these agreed-upon guidelines. Aside from these guidelines, the client may not impose restrictions on investing in certain securities or types of securities.

BHC believes that the dedicated focus of the Firm and the backgrounds of Lance Mansbridge and Bret Belohlav (collectively, the "Principals") provides unique advantages in identifying and evaluating Small Buyout fund managers and in obtaining access to top-performing funds. All of the Firm's resources are exclusively committed to investing in the Small Buyout sector. Interests in the BHC Funds are not registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state or foreign jurisdiction and may not be bought, sold or transferred without compliance with all applicable Federal, state, and foreign securities laws. Accordingly, to purchase limited partner interests in any BHC Fund, investors must be “accredited investors” as defined in the rules and regulations promulgated under the Securities Act, and “qualified purchasers” under the Investment Company Act of 1940, as amended (the “Investment Company Act”). BHC does not participate in wrap fee programs. Information regarding the history of the Firm and its team can be found in the Bay Hills Capital Partners IV, L.P. private placement memorandum, which is available upon demand. please register to get more info

BHC is compensated for its advisory services through management and performance based fees. Fee structures will vary by fund type. The BHCP Funds charge a management fee of 1% of the aggregate investor capital commitments through the sixth anniversary of the initial close. Thereafter, a step-down process for the fee rate will initiate, and a reduced management fee based on aggregate investor capital commitments is charged until the termination of the fund. BHCP Fund management fees are generally not negotiable. The BHEP Funds are separate accounts customized for a sole client. Separate account fees are negotiable, taking into account the commitment amount and the investment mandate. Management fees are payable semi-annually in advance.

Performance based fees (carried interest) vary depending on the investment mandate. Each BHCP Fund provides its general partner with a 5% aggregate profit share after limited partners have received distributions equal to the amount of their capital contributions plus a preferred return of 12%. The BHEP Funds are separate accounts customized for a specific client. The carried interest for the separate account is negotiable, taking into account the commitment amount and the investment mandate. Each BHC fund will pay for expenses relating to the organization and formation of such fund and the placement of limited partner interests in the fund up to an amount specified in the limited partnership agreement. Organizational expenses in excess of this amount will be paid by the fund but borne by the general partner or the adviser of the fund through an offset against the management fee. More information on the fees and compensation of each BHC Fund can be found in the limited partnership agreements of the respective fund. please register to get more info

As detailed in Item 5 (Fees and Compensation), BHCP and BHEP Funds charge an asset-based management fee and a performance based fee. Generally speaking, performance based fees can create an incentive for the general partner to make more speculative investments. BHC mitigates this concern through its disciplined due diligence and portfolio composition process. Each potential investment is subject to a detailed evaluation process that becomes progressively more rigorous as it moves closer to final investment approval. The Firm’s Investment Committee is comprised of the Firm’s Principals who assume active roles in sourcing, evaluating and monitoring the Firm’s investments. The Principals meet regularly to review the fund investment pipeline, existing fund investments, portfolio composition and ongoing performance. Every new investment is subject to unanimous approval by the Investment Committee. When simultaneously managing multiple funds with differing compensation structures, conflicts of interest may arise, resulting in an advisor favoring certain clients over others. Due to the differing investment mandates between the BHCP and BHEP Funds and their comparable fee structures, BHC does not consider its current fee structures to present any conflicts of interest. More information regarding the fees and compensation of each BHC Fund can be found in the limited partnership agreements of the respective fund. please register to get more info

BHC serves as a discretionary investment advisor to the BHC Funds. As of December 31, 2019, the BHC Funds comprise eight limited partnerships and 100 underlying investors, which include high net worth individuals, family trusts, corporate plans, non-profit institutions, private funds and a public pension. Potential investors in the BHC Funds must be “accredited investors” as defined in Rule 501(a) under Regulation D of the Securities Act of 1933, or “qualified purchasers” as defined in Section 2(a)(51) of the Investment Company Act of 1940. Each BHCP Fund requires an initial minimum investment of $1,000,000, which, on occasion, may be waived in the sole discretion of the general partner. The BHEP Funds are separate single-investor fund-of-funds vehicles customized for a large state pension fund; therefore, total commitment amounts are dependent on negotiations between BHC and the client. please register to get more info

BHC is focused exclusively on investing in the North American Small Buyout segment of the private equity market. BHC defines Small Buyout funds as ones that invest in established companies with typical enterprise values of $20 million to $250 million. These funds typically range in size from $100 million to $1 billion, depending upon investment scope and strategy. The Firm’s investment process leverages the unique skills and experience of the Principals and involves comprehensive qualitative and quantitative evaluation of prospective fund investments. Each potential investment is subject to a detailed evaluation process that becomes progressively more rigorous as it moves closer to final investment approval. The Firm’s Investment Committee is comprised of its three Principals who assume active roles in sourcing, evaluating and monitoring the Firm’s investments. The Principals meet regularly to review the fund investment pipeline, existing fund investments, portfolio composition and ongoing performance. Every new investment is subject to unanimous approval by the Investment Committee.
BHC’s Investment Process
General Risk Factors
An overview of the material risks involved with investments in BHC Funds is provided below. Prospective investors should refer to the Bay Hills Capital Partners IV, L.P. private placement memorandum for more information regarding these risks and other risks associated with the fund. Dependence on the General Partner and Underlying Fund Managers. The success of each BHC Fund depends on the acumen and expertise of BHC in selecting underlying funds and the acumen and expertise of the portfolio managers of the underlying funds in selecting portfolio companies in which to invest. All decisions with respect to the management and investments of each BHC Fund will be made exclusively by BHC, while all decisions with respect to the management and investments of the underlying funds will be made exclusively by their respective managers. Accordingly, no prospective investor should invest in a BHC Fund unless such investor is willing to entrust all aspects of the management of the fund to BHC and all aspects of the management of the underlying funds to their respective managers. Illiquid and Long-Term Nature of Investments. Investments in BHC Funds and their underlying investments are generally long-term in nature and require many years from the date of initial investment before disposition. The timing or amount of any distributions to limited partners is uncertain. BHC Funds’ will acquire privately offered interests in underlying private equity funds. A limited market exists for the sale of interests in private equity investment partnerships, and the transferability of such interests is generally restricted. Consequently, the BHC Funds may be unable to readily liquidate its interests in such underlying funds. Interests in the BHC Funds also represent highly illiquid investments. Transfers may only be made with the consent of the respective general partner, which may be withheld or delayed in its sole and absolute discretion. Investments in Leveraged Buyout Funds. Buyout transactions may result in new enterprises that are subject to extreme volatility, require time for maturity and may require additional capital. In addition, they frequently rely on borrowing significant amounts of capital, which can increase profit potential but at the same time increase the risk of loss. Competition for Underlying Funds. Many institutional investors, including other fund-of-funds entities, may seek to invest in many of the same underlying funds in which the Fund may also seek to invest. Some of those underlying funds may limit the number of investors and the amount of capital they raise, which may limit or eliminate the ability of the fund to invest in those underlying funds. Indemnification Obligation. Each investment partnership is obligated to indemnify and hold its managers and related parties from and against any and all claims, liabilities, costs and expenses incurred by them arising out of or in connection with their activities on behalf of the partnership, unless claim, liability, cost or expense results from such indemnified party's bad faith, gross negligence, willful misconduct or breach of fiduciary duty under the partnership agreement. In addition, if the assets of the fund and the unfunded capital commitments of the partners are insufficient to satisfy this indemnification obligation, the partners will be obligated to return distributions received by them to enable the respective fund to satisfy these obligations. Default on Capital Commitments. Investors are required to make capital contributions to their respective investment partnership over an extended period of time. If an investor defaults on its obligations to make such a required capital contribution, the consequences of such default could be severe for that investor and other investors in the respective fund. Multiple Layers of Fees and Expenses. Each investor in a BHC Fund will directly bear the fees and expenses charged by that fund, and indirectly bear the fees and expenses of the underlying partnerships of that fund. This will result in greater expense and less potential for return on investment than if such fees were not charged and such expenses were not incurred. Delayed Filings. An underlying fund may be unable to provide final Schedule K-1s to limited partners in such fund for any given tax year until after April 15 of the following year. Final Schedule K-1s will not be available until completion of the annual audit of each underlying fund (which may be six months or more after year end). It is generally anticipated that limited partners in a BHC Fund will be required to obtain extensions of the filing date for their income tax returns at the federal, state and local level. Limited Partners May be Required to Return Distributions. If a BHC Fund is required to return any distribution made to it by an underlying fund, the BHC Fund, in the sole discretion of its general partner, may require each limited partner to return to the fund any or all of the distributions paid to such limited partner to the extent necessary to satisfy such obligation. State and Federal Securities Laws. The BHC Funds are not registered under the Securities Act of 1933, the Investment Company Act, or under the securities laws of any other applicable jurisdiction in reliance on exemptions from registration under such laws. Because the BHC Funds have not been registered under the Securities Act of 1933 and the Investment Company Act, investors will not be afforded certain regulatory protection afforded to investors in entities that are registered under such laws. please register to get more info

The SEC requires that all registered investment advisers disclose all material facts regarding any legal or disciplinary events that would be material to a client’s or prospective client’s evaluation of the firm’s advisory business or the integrity of its management. BHC has no legal or disciplinary events to report. please register to get more info

BHC is not affiliated with any investment advisers or broker-dealers. BHC, and its Principals, are not registered, nor have an application pending to register, as a futures commission merchant, commodity pool operator, a commodity trading advisor, or an associated person of the foregoing entities. BHC serves as the sole investment adviser of the BHC Funds, and has sole discretion over the investments made by each BHC Fund. In addition, each BHC Fund has a distinct general partner that is responsible for the day-to-day operations of the fund and each general partner is an affiliate of BHC. The general partner of each BHC Fund may hold an interest in the fund in an effort to align interests between the general partner and the limited partners. please register to get more info

TransactionsandPersonalTrading
BHC has adopted a Code of Ethics which governs the standards of business conduct for all employees. The Code requires employees to place the interests of clients above those of BHC. Employees must conduct themselves in an ethical and professional manner. Each new employee is provided with a copy of BHC’s Code of Ethics. Staff members who possess material nonpublic information that could affect the value of an investment are strictly prohibited from trading or inducing others to trade on the material nonpublic information. The prohibition on using this information goes beyond the direct buying and selling of individual securities or bonds. Staff members must not use material nonpublic information to influence their investment actions related to derivatives (e.g., swaps or option contracts), mutual funds, or other alternative investments or cause others to act on the information. The Firm has adopted a personal trading policy to guide its employees. BHC will provide a copy of its Code of Ethics to any investor or prospective investor in the BHC Funds upon request. please register to get more info

Due to the nature of private equity funds, BHC does not use broker-dealers for its investments. Investors in private equity funds typically subscribe to the fund and negotiate terms with the fund’s general partner on a private placement basis. Investment opportunities are sourced through direct solicitation of, or by, a fund’s general partner or its placement agent. The required disclosures regarding the selection, recommendation, or compensation of broker-dealers under Item 12 are not relevant to BHC and its investment model; thus, BHC has no applicable information to disclose. In the rare instance that an underlying investment fund may distribute the public stock of an underlying portfolio company to a BHC fund, the Firm will select a broker for its transactions based on the following factors: transaction costs, the accuracy and timeliness of trade executions, the broker’s experience with private equity distributions and restricted stocks, and the overall efficiency in transferring distributed shares and executing trades. please register to get more info

BHC’s ongoing review process includes (1) the assessment of performance for each investment partnership through a review of the fund’s financial statements and portfolio investments, (2) the assessment of each underlying manager’s compliance with governing documents and initial investment plans, and (3) the ongoing communication and interaction with existing managers through consistent participation in annual meetings, advisory boards, and conference calls. All client accounts, BHC Fund accounts, and underlying fund accounts are updated and reviewed by BHC on a quarterly basis. As part of the performance monitoring process, quarterly financial statements received from BHC’s underlying partnerships are reviewed for new investments, dispositions, valuation changes, and other relevant updates. BHC tracks these developments quarterly, and updates all applicable client and BHC Fund accounts accordingly. An internal report that summarizes the overall performance of each portfolio, and any significant developments for the quarter is then circulated amongst the BHC investment team.

In addition to the quarterly performance review, BHC reviews all applicable client accounts and BHC Fund accounts each time an underlying manager draws down additional capital, or distributes proceeds related to a portfolio company investment. Other factors that may trigger an intermittent review include: (1) material changes in the team, structure, or organization of an existing underlying fund, (2) an investment or the review of a potential investment in a new underlying fund, (3) material changes in the economic or political landscape, and (4) other circumstances specific to BHC or its clients.

The BHC investment team is collectively responsible for overseeing all client accounts, BHC Fund accounts, and underlying fund accounts. Performance figures are updated at least once per quarter by an Analyst or Associate. A final review of all accounts and performance measurements is conducted by the BHC Principals and BHC’s accounting consultants.

Each BHC Fund provides its investors with a quarterly update letter which discusses the overall performance of the portfolio, new developments within the portfolio, and an outlook of the general environment as it relates to Small Buyouts. Other periodic written reports provided to investors in each BHC Fund include: (1) unaudited quarterly financial statements and capital accounts for the first, second, and third quarter of each calendar year, (2) audited annual financial statements and capital accounts at year end, and (3) annual tax information related to the client’s investment in the respective BHC Fund. please register to get more info

BHC does not receive any economic benefits or monetary compensation from any person or entity that is not a client, for providing investment advice to its clients. Neither BHC nor its Principals directly or indirectly compensate any third party individual or entity for client referrals. BHC does not utilize placement agents to solicit business from clients or prospective clients. please register to get more info

BHC has custody of the BHCP and BHEP Funds’ assets, but does not act as a qualified custodian for the underlying funds. The BHCP Funds are audited annually by KPMG, LLP while BDO USA, LLP audits the BHEP Funds. Both corporations are independent public accounting firms, and audited financial statements are distributed to all investors in the BHC Funds on an annual basis. please register to get more info

BHC has discretion to make private equity investments for all BHC Funds, subject to the terms, provisions and investment mandates, as set forth in such BHC Fund’s partnership agreement. Investors execute a subscription agreement and partnership agreement in connection with their investment. Each agreement contains a power of attorney granting the general partner of the fund certain powers related to the orderly administration of the fund. BHC, as adviser to the BHC Funds, shall have exclusive management and control of the affairs of the partnerships and shall have the power and authority to do all things necessary or proper to carry out the purposes of the partnerships. please register to get more info

The BHC Funds invest in private equity funds. BHC and the BHC Funds typically do not receive distributions of public securities or directly hold public securities. In the event that BHC or a BHC Fund receives public securities, those securities would be promptly liquidated. Proxy voting is not generally applicable to the BHC advisory business. please register to get more info

BHC does not have any financial condition that is reasonably likely to impair its ability to meet contractual commitments to BHC’s clients. BHC has never been subject of a bankruptcy petition. please register to get more info