Hardly Strictly Business

Cal Alum Warren Hellman Plays His Own Tune in Investing, Philanthropy.

Continued from page 1

 

Banjo-Playing Billionaire
In 1976, after Lehman, Hellman co-founded a venture capital firm in Boston now called Matrix Partners. With his roots in the Bay Area calling him back, Hellman returned to San Francisco and co-founded the private equity firm, Hellman & Friedman in 1984.

 

But Hellman is not your typical private equity billionaire. On a recent sunny day in San Francisco, a CD of Emmylou Harris blares from his large office with two walls of windows overlooking the bay from the Golden Gate to the Bay Bridge. Three banjos are scattered around the office along with many family pictures. One shelf contains a small collection of decorative silver wine glasses and a yarmulke (Jewish skullcap) with a yellow cursive Cal embroidered on it, presumably for the weekly Torah class Hellman has been hosting in his firm’s conference room for 25 years.

 

Hellman wears the standard business-casual uniform—khakis and blue button-down shirt---but with a twist: a cowboy-style belt buckle. The Hardly Strictly Bluegrass Festival is approaching, and from his office next door, Hellman & Friedman CEO Philip Hammarskjold hears Hellman play the banjo more and more.

 

Hammarskjold, who joined Hellman & Friedman in 1992, credits Hellman for establishing the firm’s culture, which includes an unofficial “no-jerk” policy. “There’s a level of decency and basic kindness that is expected of people here that he set the standard for at the beginning,” Hammarskjold says.

 

John Stanton, whose company, Western Wireless, received $130 million from Hellman & Friedman in the early 1990s, echoes that sentiment. Stanton was surprised when Hellman and his partners flew to Seattle after Deutsche Telekom acquired Western Wireless spinoff VoiceStream; Hellman & Friedman ultimately received
$1.5 billion from its Western Wireless investment.

 

“They took us to dinner. They gave the management team gifts. I’m not sure anyone else does that,” says Stanton. “It’s pretty unusual in that business.”

 

Committed Steward
Hellman also holds a strong sense of stewardship toward his limited partners, whose money the firm invests, including such big institutional investors as the California Public Employees’ Retirement System (CalPERS), the largest U.S. public pension fund, and the government of Singapore.

 

“Warren is very focused on doing what’s right,” says Hammarskjold. “He feels a great sense of responsibility for the capital that has been entrusted with us to invest.”

 

And the investors continue to invest because the firm delivers, to the tune of annual gross returns of about 40 percent or more for most of its history. Even during the recession last year, Hellman & Friedman closed a new $8.9 billion fund. (That fund is still investing, so it is a little premature to predict its return.) With that money, Hellman and his partners invest in companies seeking $300 million to $1.2 billion in equity capital, always with a long-term perspective of up to ten years.

 

Hellman points to a few characteristics that make his firm unique: It doesn’t collect fees when it buys a stake in a company, and the firm’s partners invest more of their own money in the firm’s funds compared with other private equity shops, which ensures that their interests are closely aligned with those of limited partners. Hellman also believes in letting a company’s management run the company and instead focuses on providing advice on what his firm knows best—capital planning and finance-related matters.

 

“(Warren) really was the godfather, the mentor,” says Stanton, formerly of Western Wireless. “He’s got a soft voice; he can’t be heard in a shouting match. But when Warren speaks, everyone listens.”

 

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