Corsair eyes finish line for fundraise

The financial services-specialist has collected more than $900m but will need an additional fundraising extension from LPs to get to its $1.5bn target.

Corsair Capital a financial institutions-focused firm that spun out of JPMorgan in 2005, has raised more than $900 million for its fourth investment vehicle as a finish line to its long fundraising that started in 2009 is finally on the horizon.

The firm, which launched its Corsair IV Financial Services Capital Partners fund in 2009 with a $2 billion target, cut its target to $1.5 billion and late last year got a six month fundraising extension from limited partners to stay in the market, according to LP and other market sources. Corsair will need another fundraising extension as the six-month extension deadline has passed, according to a person with knowledge of the process.

However, several LPs are set to commit to the fund and the firm has collected more than $900 million, sources told Private Equity International. That’s up from the $668 million Corsair reported to the US Securities and Exchange Commission in May, according to SEC documents. The firm had collected $395 million as of May 2010, according to SEC documents.

Corsair declined to comment.

Financial services has been tricky … even though there's been a lot of noise about all the great opportunities in the distressed environment with financial services, it has been difficult for [some firms].

Industry source

The firm has been battling a tough fundraising environment that has forced other general partners to seek extensions and cut fund size targets. Corsair also has been affected by a let-down in financial services investing after expectations of historic investment opportunities never quite materialised post-global financial crisis, sources said. Firms like TPG Capital that raised specific funds to invest in the sector ended up cutting fund sizes as the opportunities were not as numerous as they expected. In TPG’s case, the entry of the US government into the sector to help bail out financial institutions in 2009 put a damper on the opportunity, sources told Private Equity International at the time.

“Financial services has been tricky … even though there’s been a lot of noise about all the great opportunities in the distressed environment with financial services, it has been difficult for [some firms],” said one industry professional with knowledge of the sector.

Another firm that has expertise in financial services,WL Ross & Company, recently closed its fifth fund after slashing the target in half and winning approval for more marketing time from its LPs. In Ross’ case, however, LPs were hesitant to sign on to Fund V over concerns about stability of team and Ross’ ongoing commitment to the firm.

Corsair is led by chairman Nicholas Paumgarten, president Ignacio Jayanti, managing director Clifford Brokaw IV

Nicholas Paumgarten

and chief operating officer and chief financial officer Amy Soeda. Earlier this month, Corsair announced that John Maltby, former group director of commercial banking for Lloyd’s Banking Group, would join later this year. In 2010, Corsair appointed former Standard Chartered chairman and group chief executive Mervyn Davies as vice chairman and full-time partner.

The firm raised $1.1 billion for its third fund in 2007 – its first vehicle raised after spinning out from JPMorgan. Fund III was generating a 7.74 percent annual rate of return as of 31 June, 2011, according to documents from the North Dakota State Investment Board, an LP in the fund. Additional LPs in the third fund includeChubb Group, Cranbrook Educational Community, CUNA Mutual Life Insurance, Marsh & McLennan, Massachusetts Mutual, Neuberger BermanNorth Dakota State Investment Board and the Phoenix Companies.