Ex-UTIMCO Team Starts Private Markets Firm

Backed by a large family office, Cypress Creek Partners has just acquired $500 million in fund-of-funds assets.

Austin, Texas. (Thomas Ryan Allison/Bloomberg)

Austin, Texas.

(Thomas Ryan Allison/Bloomberg)

A team of senior investors has spun out from the University of Texas’s endowment manager to create a private markets firm focused on backing new and developing managers.

Founding partners William Prather III and Richard Rincon, who most recently worked together at the University of Texas/Texas A&M Investment Management Co., on Monday closed an acquisition to help launch their new investment firm, Cypress Creek Partners. Prather is the former head of natural resources and infrastructure at UTIMCO, while Rincon previously served as senior director of private equity.

“We had great experiences at UTIMCO — it’s a great platform,” Prather said in an interview with Institutional Investor. “But there was a clear market opportunity and we all had the desire to capitalize on that. You get one or two shots like this in a lifetime, and I don’t think any of us wanted to watch it go by.”

With Cypress Creek, Prather and Rincon are looking to build on their experiences at UTIMCO, where they deployed over $5 billion across private market funds and co-investments. With the backing of what Prather described as a “large, name-brand” family office in the U.S., the new firm is starting with the acquisition of Endowment Advisers, a fund-of-funds manager with more than $500 million in private assets in permanent capital vehicles.

“The firm was aligned with what we want to build; it was aligned with our expertise; and it was aligned with what we view as the big market trends we want to capitalize on,” Prather said of the acquisition.

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According to Rincon, the Cypress Creek strategy is “a continuation of the playbook [they] successfully refined” at UTIMCO. The team aims to make anchor investments in new and developing managers — defined as those that have raised up to four funds — focusing on buyouts, growth equity, infrastructure, and natural resources. Cypress Creek will also make co-investments and direct investments, with a main focus on the U.S.

“The core pillar is backing the next generation of investment teams,” Rincon said. “It’s not just about providing capital; it’s really being a holistic, long-term partner to these teams to help them think about how to build their franchises across the cycles.”

By betting on less-established managers, Rincon and Prather believe they can deliver outperformance in asset classes that have been attracting record amounts of capital. They cited, as one example, a February 2019 study by Cambridge Associates, which found that new and developed managers on average accounted for more than 75 percent of the top ten private equity managers between vintage years 2004 and 2015.

Now that they have closed on the acquisition of the Endowment Advisers funds, the Cypress Creek founding partners are looking to continue to scale their strategy, as well as build out their team. In addition to Rincon and Prather, the current team also includes UTIMCO’s former director of operational due diligence Benjamin Murray, who has come on board as Cypress Creek’s chief operating officer.

They are planning to expand the team to around 6 to 8 people, including a couple of junior roles that Cypress Creek is actively recruiting for.

“We’re excited to have taken this leap and now shifting our focus to building a strong team and executing the Cypress Creek strategy,” Rincon said.