Corsair Capital is trying to raise $2 billion for its fourth fund that will target investments in financial services, and for the first time has engaged the services of a placement agent, Atlantic-Pacific Capital.
Corsair IV Financial Services Capital Partners will make investments of between $50 million and $350 million in banking, insurance, asset management and specialty finance businesses. The firm will charge a management fee of 1.75 percent of commitments during the investment period, which is five years after final close. After this, the fund will charge 1.25 percent of invested capital.
The fund will target returns of 2 times invested capital, or 25 percent gross internal rate of return. General partner commitments will be 1.5 percent of total commitments up to a maximum of $30 million.
Corsair had been an affiliate of JP Morgan since 1993 and spun out as an independent firm in 2006. It was founded by chairman Nicholas Paumgarten and president Ignacio Jayanti.
The firm decided to hire Atlantic-Pacific for its fourth fundraise to access public pensions and other government entities, the firm said in a letter to the US Securities and Exchange Commission in October. The letter was written in support of the placement agent industry and against a proposed comprehensive ban of placement agents interacting with public pensions.
“We did not have the necessary network of relationships in this segment of the investor community,” the firm said in the letter. “We were able to only secure a couple of such type of investors for our predecessor fund, Corsair III Financial Services Capital Partners.”
Atlantic-Pacific has “exceeded our expectations across the board”, the letter added. The placement agent helped Corsair put together a marketing programme for the fund and has targeted more than 100 government entities. “We believe that without APC our ability to access this investor base would be severely limited,” the firm said.
APC is also assisting potential investors in performing due diligence on the fund, the firm said.
The SEC ban would adversely affect firms like Corsair that do not have in-house marketing teams, the firm said. The ban would “cut off access to a wide pool of potential investors and in particular, large US institutional investors, creating an unfair market bias toward larger firms that are more favourably resourced to gain access to such investors”, Corsair said.
Corsair was made whole in its investment in National City bank last year after the US government back-stopped a buyout by rival bank PNC Financial Services for $5.2 billion. Corsair led a $985 million investment in the struggling bank in April 2008.
The government agreed to take a $7.7 billion stake in the combined entity after the acquisition through the Troubled Asset Relief Program’s Capital Purchase Program.
Corsair made the investment from its third fund, which had been targeting $1 billion. It’s unclear how much the fund attracted in its final close.