Launching a first-time fund has historically been a challenging endeavour. From attracting investors to getting the first deals done, new managers coming to market now have an even higher bar to clear given the uncertain market environment and competition for assets.
The venture will invest into, and provide capital solutions for, emerging and first-time alternative investment fund managers, according to a statement. Along with capital, it will also provide, strategic advice, back-office infrastructure and access to broader Stifel banking services, as well as global distribution, capital formation and marketing capabilities.
Twelve Degrees will raise capital from third-party investors, Mary Hunt, principal at RCP Advisors and managing principal and portfolio manager at Twelve Degrees, told Private Equity International, declining to share how much it is seeking. Eaton, Stifel and RCP will also pool capital for a GP commitment.
The platform is expected to back up to three North America-focused mid-market managers per year, Hunt said. Targets will be sector agnostic and include buyout and growth equity managers, first-time funds and spin-outs. It will make anchor commitments of between $40 million and $75 million.
“Twelve Degrees is the exact position of the centre of the sun at the start of nautical dawn, signifying the start of a new day, full of opportunity,” Jeff Eaton, global co-head of Eaton and managing principal at Twelve Degrees, said. The new platform exists to provide capital opportunities to high potential managers, giving them the “light they need to grow and perform,” he added.
Twelve Degrees aims to employ a data-driven approach in selection by using RCP’s proprietary GPScout database, which tracks performance of more than 2,900 alternative investment firms, the statement noted.
The majority of Twelve Degrees investments will be self-liquidating over the life of the underlying funds, Hunt noted, declining to add further details.
First-time fundraising statistics bely the challenges faced by emerging managers. North American first-time funds raised a record $15.7 billion last year, compared with $10.9 billion in 2020, according to Pitchbook. European first-time funds raised $7.6 billion, the third-highest amount since 2012.
However, PEI’s most recent LP Perspectives survey found that only 31 percent of respondents were “just as likely” to commit capital to new managers as to existing ones, compared with 38 percent in 2020, and 43 percent said they do not invest at all in new managers, compared with 29 percent the year before.