Pollen Street reaches long-awaited final close on Fund III

After more than two years in market, the RBS spin-out has beaten its original target to raise £402m for growth investments in financial services.

Pollen Street Capital, which invests in financial services businesses in Europe, has closed PSC Fund III, its first full fund since it spun out from RBS in 2013, on £402 million ($557 million;€452 million).

Fundraising for Fund III was lengthy. Pollen Street began initial discussions with investors in 2015, held a first close in March 2016 and a final close above its £350 million target at the end of January, the firm said. The firm, previously known as SOF Investments, raised a top-up fund from investors in 2014.

Lindsey McMurray, founder and managing partner of the firm, told PEI that the frenetic fundraising market had actually slowed Pollen Street’s own fundraising efforts.

“As much as there are huge amounts of capital, it almost makes it harder for new funds to get going, because there is so much time and capital spent on re-ups that the LPs have limited time to assess new teams,” she said. “And we were not mainstream; we are focused on financial services.”

In 2016 Pollen Street hired Magnus Christensson, former Europe fundraising head at TPG Capital, as partner and head of fundraising and investor relations, to bolster the marketing effort.

“We had to take time to explain to investors why what we were doing was not a macro-economic play,” said McMurray. “We take growth businesses with a speciality propositions and take market share from the big names.”

“There have been some high-profile losses in financial services and people then tend to extrapolate that across to what we were doing,” she continued. “But because we are in that lower mid-market segment our strategy and risk profile is different.”

Across its financial services deals, Pollen Street has delivered a gross IRR of 29 percent and 2.9x money multiple, the firm said.

“PSC now looks forward to replicating its strong track record of delivering top-quartile returns to investors in PSC Fund III,” said McMurray.

“We are fortunate to have a high-quality set of investors and we very much appreciate their support in making this a successful fundraising,” said Christensson. “We are committed to earning their continued support by maintaining a focus on value creation.”