Chickasaw Nation's private equity fund does its first deal
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The U.S. doesn't have a sovereign wealth fund, at least not yet, but there are several sovereign wealth funds within the country.
The big picture: These are funds established by Native American tribes, totaling billions of dollars.
- The third-largest is for the Chickasaw Nation, an Oklahoma-based tribe that claims more than 80,000 citizens. It also may be the only one with a wholly owned private equity effort, called Pennington Creek Capital.
Driving the news: PCC was formed last year, and yesterday announced its first deal — acquiring Rite in the Rain, a 99-year-old maker of water-resistant writing and field organization products, from Capitol Peak Partners.
- No financial terms were disclosed, but PCC says it plans to invest in companies with between $10 million and $25 million in EBITDA.
Behind the scenes: Alan Marcum, a PCC managing director and deputy secretary of the Chickasaw Nation's commerce department, tells Axios that the group's investment model is based somewhat on Berkshire Hathaway, in terms of buying majority stakes in cash-generating businesses with an eye toward long-term ownership.
- "We're not looking at a lot of tech or high-risk types of companies, or those that need transformation," Marcum explains. "Instead we want established entities where we can partner with management to help them execute on their plan, without hovering over them. The Chickasaw Nation also has a lot of different relationships and abilities to help companies expand."
- Marcum also was involved in the creation of Good Springs Capital, in which the Chickasaw Nation is an anchor LP. He says the tribe's broader goal is asset diversification.
The intrigue: Native American tribes typically aren't subject to capital gains or other federal taxes on investment income, given that they are recognized as sovereign government entities.
- That means that PCC may be able to pay a premium for certain companies, while maintaining the same internal return profile as a traditional private equity fund paying less.
