Overview
Keystone is an alternative investment advisory firm and fund manager. We provide alternative investment access, due diligence, and fund management and selection services to our clients. Our team has broad private markets and alternative investment experience, with particular expertise in small and lower middle market buyout, energy, and private debt.
We carefully evaluate risk through rigorous due diligence to understand the risk parameters of each investment. We believe the combination of extensive due diligence, appropriate sector allocation and diversification, and our deep network of relationships with top fund managers and service partners provides highly attractive private market investment opportunities for our clients, which include over 100 family offices, foundations, wealth management firms, and other investors.
Fund Management & Selection
Keystone currently manages two dedicated funds of funds. When creating a fund, we seek the most prudent portfolio allocations for the given investment environment. We diligently strive to avoid investment fads. For example, less than one-third of Keystone’s 2006 fund was committed to large buyout funds, an area where many private equity fund of funds were investing significant capital at the time. At Keystone, we preferred to allocate capital to small buyout funds, which we saw were purchasing companies at much lower valuations and with less financial leverage.
When creating a portfolio of funds, we utilize the collective experience of our diverse team. Our team members have reviewed hundreds of private equity and alternative investment funds during their careers. Our deep network of relationships, stringent due diligence, and small fund sizes allow us to be highly selective in our investment process. We employ a relative value approach and consider both primaries and secondaries.
Since inception, Keystone has emphasized investments in small buyout funds. We also have expertise and invest in energy & power and private debt funds, areas we believe are particularly attractive given the current economic conditions. For more on these strategies, please refer to the following links:
Small Buyout
We define small buyout funds as those with less than $500 million in total commitments and that buy or invest in companies with enterprise values between $20 million and $200 million. Keystone believes small buyout offers numerous advantages over mainstream buyout, including the following:
- Focus on operational improvements vs. financial engineering
- Less reliant on credit and IPO markets
- Vast number of small / lower-middle market companies
- Low purchase prices with less competition for deals
- Recession creating opportunities to buy companies on low multiples of depressed earnings
- Potential for multiple expansion upon exit to strategic buyer or middle market PE fund
As our core area of focus, Keystone has taken a proactive approach in identifying, benchmarking, and building relationships with America’s small buyout fund managers, as top funds can be over-subscribed or open to few new investors. Utilizing a tracking database with over 500 U.S. small buyout funds, we track and build relationships with top fund managers around the nation before they raise their next fund.
Due to our strong relationships and experience in this sector, we have invested with several top-quartile fund managers over the years and in many funds where investor demand has exceeded the fund’s target.
Small Buyout | Energy & Power | Private Debt
Energy & Power
Investment in the energy and power sectors involves substantial complexity and can require a different knowledge base and evaluation process than investing in other types of private equity funds.
The investment thesis for Energy & Power includes the following:
- World demand for energy continues to grow
- Finite supply of traditional energy sources
- Ability to earn outsized returns during times of inflation and rising commodity prices
- Substantial transitions occurring in power and transmission industries
Keystone has reviewed and has relationships with fund managers in all sectors of the energy universe, including upstream, midstream, power generation and services. We focus on funds in traditional hydrocarbons (oil, gas and coal) as well as renewables.
Small Buyout | Energy & Power | Private Debt
Private Debt
The recent credit crisis and recession have created attractive opportunities to (1) provide new debt and financing to solid, functioning companies, and (2) buy existing debt at significant discounts to par as distressed sellers seek liquidity.
Keystone seeks opportunities in those areas of the private debt markets which are not receiving attention from the largest pools of institutional capital and where Keystone believes competitive levels are lower and risk-adjusted returns more attractive.
Keystone sees the following attributes in today’s private debt market:
- Credit crisis creating dislocation in the market
- Exit of banks and many finance companies has driven up yields on new primary loans
- Current opportunities offer higher returns and more security than similar investments pre-recession
- Increase in distressed credit opportunities
Small Buyout | Energy & Power | Private Debt
Institutional Accounts
Keystone offers separate account services to institutional investors seeking to increase allocations in targeted sectors, such as energy or small buyout. Through a separate account platform, institutional investors can leverage Keystone’s sector knowledge, relationships with top fund managers, due diligence expertise, and broad benchmarking abilities to gain additional expertise in targeted sectors of private equity.
Due Diligence Services
Through our Due Diligence Services platform, institutional investors, as well as family offices, endowments, and foundations, are able to have our experienced team conduct thorough due diligence on an alternative fund or private partnership investment they may be considering under a fee-based model. Due diligence performed as part of these services may include the following: Track record confirmation, analytical review of track record to discover inconsistencies or areas of concern, discussions and confirmations with auditors, attorneys and other fund service providers, reference calls and background checks on fund managers, coordination of third-party legal review of all fund partnership agreements and subscription forms, benchmarking against other similar funds in a specific sector, and certain other due diligence items.
These services are designed to assist our clients in making investment decisions with respect to track record, team, and comparison to peers. As part of these services Keystone employs certain audit tactics and “post Madoff” tests and confirmations to verify past cash flows, financial statement quality, and likelihood of potential misappropriation.
Advisor Platform
Keystone currently works with various wealth management and advisory firms who use Keystone to gain access to private market and alternative investments for their clients. Keystone funds are on the platforms of several of the nation’s broker/dealers and RIA’s and available to over 1,500 advisors nationwide.
In addition to access to top fund managers, Keystone provides a high level of transparency, communication, and detailed reporting to advisors. Keystone funds are audited annually by Deloitte and Touche and we implement a series of internal controls, including independent accounting and outsourced back office functions, to ensure accurate and timely reporting.
Financial advisors seeking more information on our Advisor Platform should contact John Earl at (925) 407-3120 x101 or jearl@keystonenational.net.
Click here to access Keystone's Advisor Central.