MSD Capital: Michael Dell could make his mark in the financial world, too. MSD Capital, the firm that manages more than $10 billion of the computer billionaire’s money, is opening a $500 million European fund to outside investors. It's a philosophical shift. If investors buy in, MSD is already big enough to be a ready-made alternative investment powerhouse.
The biggest firms with funds open to the investment world at large — some of them now publicly traded — run several times as much money as MSD. But even as the firm stands, it might make it into the top 25 or so managers globally. It has already been involved in private equity deals alongside better-known investors such as George Soros and John Paulson.
But to date, MSD has arguably kept a lower profile even than Microsoft founder Bill Gates’ equivalent private vehicle, Cascade Investment. MSD appears to be set up to deal with the reporting and compliance demands of outside investors — one thing that sets it apart from many family office investment operations. But it’s still a shift to open the doors after exclusively running Dell’s own money for more than a decade.
That’ll happen initially with the MSD European Opportunity Fund, which is aiming to raise $500 million to invest in distressed European securities, with Dell and partners in MSD investing at least $225 million. To help outsiders get comfortable, the MSD insiders will be locked in for longer, and the 20 percent performance-based fee charged to investors will be left in the fund for at least three years. MSD’s broader sales pitch is likely to include its long-term orientation. One of its managing partners came from Goldman Sachs , the other from ESL Partners, the investment firm headed by Eddie Lampert that is sometimes regarded as a smaller version of Berkshire Hathaway .
As for MSD’s reasons for opening up, one may be that even with $10 billion to play with, it can’t allocate enough capital to the European fund to give it the needed firepower. A logical next step would be to bring outside investors into funds that follow other strategies, too — or to help diversify the firm’s activities further. If the experiment with the European fund works out, Dell could become a name to be reckoned with in finance as well as technology.