Commerce Street Capital has closed its Commerce Street Income Partners II Fund on approximately $125 million.
The fund had been in market since January of 2009, and will invest primarily in senior pieces of securitised bank debt. The close represents a substantial increase from the firm’s predecessor fund, which closed on $52 million in March of 2007.
The bulk of the CSIP II’s capital comes from two pensions: The Kentucky Retirement System, which committed $50 million in May of 2009, and the Arizona Public Safety Personnel Retirement System. The remaining LPs in the fund are primarily family offices, endowments and smaller pension funds.
Commerce’s second fund, which is already nearly fully invested, is targeting opportunistic credit, which it believes is still available in some “niche plays”.
“A lot of the credit opportunities in structured finance are certainly not as compelling as they were,” Commerce Street president and chief executive officer Dory Wiley told PEO. “We’re fortunate because the opportunity is still there for us, but I don’t know how long it will stay.” Wiley added that he expects the opportunity to last roughly another eight months or so.
“This is an illiquid, ill-followed sector, and I have found that there’s more subordination and safety to the senior tranches and what we’re buying than in most any other sector,” Wiley said. “It’s fairly low-risk paper with pretty good returns.”
Commerce Street, established in 2007, is an investment bank that manages funds in the banking and financial services sector.