Financial Stocks expands private equity arm

The Cincinnati, Ohio-based firm has hired former investment banker Michael McMahon to head its new San Francisco office.

Financial Stocks has appointed Michael McMahon as a managing director and head of its new San Francisco office, which will focus on West Coast private equity investments in small regional banks and savings and loans.

McMahon was previously a managing director with Sandler O’Neil & Partners, where he focused on similar investments.

The 12-year old multi-strategy investment firm Financial Stocks has approximately six of its 50-some employees devoted to private equity. It started its private equity division 10 years ago, and concentrates exclusively on private banks and thrifts in area with growing demographic.

“We’ve found it to be a sector with very good risk-adjusted returns,” said John Stein, the firm’s co-founder and president. “It’s a niche which we believe is not focused on by a lot of the larger private equity shops, and we think there’s value to being an independent niche player in the space.”

The firm’s last fund closed on $187 million (€142 million), and is approximately two-thirds invested, Stein said. Its limited partners include a mix of family offices, high net worth individuals, banks, insurance companies and foundations.

“We believe we are the largest provider of private equity to the regulated financial industry in the US,” Stein said.

Financial Stocks manages approximately $300 million in capital across its five funds, which have made roughly 75 investments. In each company, firm typically invests 5 percent to 10 percent, generally equating to $5 million to $25 million of non-controlling equity. Its portfolio currently contains approximately 35 companies.