Emerging manager-focused Pacenote launches with first fundraise

The placement agent will seek relationships with independent sponsors and lower-mid market buyout, growth and late-stage venture funds.

Pacenote Capital, the new private equity placement platform, will focus on working with lower mid-market emerging managers not broadly known in the institutional marketplace, co-founder Casey Peters told Private Equity International.

Pacenote, which officially launched on 9 September, is formally engaged with a GP targeting $150 million for a fund coming to market on 1 October. It has a pipeline of funds targeting between $75 million and $400 million, and its sweet spot will be sub-$250 million funds in late-stage venture, growth equity and buyouts, Peters said.

Pacenote expects the managers it will assist in fundraising to shoot for return expectations of 3x and to put up a higher-than-average GP commitment. For instance, Pacenote’s first GP has made a 10 percent commitment to its fund.

“LPs want to know that the GPs have meaningful personal skin in the game and are valuing their capital as their own,” Peters said.

Large allocators, such as Teacher Retirement System of Texas, New York City Retirement Systems and several endowments, have emerging managers programmes and know they have the highest GP/LP alignment, according to Peters.

Several pension systems are exploring ways to engage with emerging managers, while insurance companies and family offices are looking for high-quality emerging managers that can “move the needle,” Peters noted.

The new firm has a strategic partnership with Pendyne Capital, a Florida-based single-family office whose current private markets portfolio focuses on investing in direct deal opportunities with independent sponsors.

Pacenote intends to engage with spin-out managers and independent sponsors well ahead of their first commingled fundraise. Pacenote’s Pendyne partnership will allow the GP to execute on pre-fund deals and be patient in the fundraising approach.

For instance, the group is in discussions with a GP that won’t raise its first institutional fund until 2021, but is already working with Pacenote to develop a close understanding and relationship. Pacenote will also help the GP raise capital for pre-fund deals and provide strategic direction in the interim, Peters said.

The firm will also back managers with quirky and unique strategies.

Unlike larger placement companies that work with multiple managers at one time and offer investors the chance to “pick and choose” from a list, Pacenote will only work with one or two managers in a year.

“This will ensure we keep our underwriting standards extremely high and will be fully dedicated to those relationships,” Peters said.

Peters was previously with placement firm Mercury Capital Advisors. His fellow co-founders include Matthew Evans, who was at placement firm Pinnacle Trust Partners; Bill Braxton, who managed client and business development at alternative investments firm Crestline Partners; and Ryan Bailey, who until recently was head of investments at Children’s Health System of Texas.