Three Hills founder Moretti launches ‘service centre’ for new mid-market GPs

Mauro Moretti, founder of Three Hills Capital Partners, has launched a fund management business that backs new managers.

Atypical Partner will provide first-time fund managers with seed capital, as well as the infrastructure to set up their firms, including access to legal and tax counsel, investor relations and operations support.

The group will help foster the “next generation of impactful investors” by providing access to a network of capital, a fully functioning regulatory and operations support team, as well as senior counsel, according to Moretti.

Atypical serves as the umbrella company of Three Hills, the Goldman Sachs-backed investment vehicle Pall Mall Legacy and hedge fund Sinclair Capital, according to a statement. Moretti will remain focused on managing Three Hills and a chief business officer will join in January to head up Atypical, it is understood.

The firm’s offering is similar to Meteor5 Capital, which was founded by four senior members of MVision Private Equity Advisors in 2018, and SP Capital, a $200 million fund established by placement agent and secondaries advisor Sixpoint Partners, that backs spin-outs.

Here are three things to know about Atypical.

It will focus on mid-market GPs

Atypical is seeking to back managers that are multi-geography, mid-market-focused and employ innovative and specialised strategies, according to Moretti. These strategies can span private equity, real assets, private credit and impact investing.

“I don’t think that the market needs another plain vanilla GP,” Moretti said. “The market is becoming more and more specialised, so either you specialise on a product like we have done with Three Hills (hybrid capital), or you specialise in geographies or sectors.”

Atypical will serve as cornerstone investor of GPs under its platform, with commitments of between €30 million and €50 million into each manager. It has started reviewing new strategies and GPs to introduce to its investor network, Moretti said.

Capital comes from third-party investors

Institutional investors from the US and Canada make up half of Atypical’s investor base, according to Moretti. The other half are private wealth investors, including family offices and high-net-worth investors.

“Private capital will be our engine for growth”, said Moretti. “Most of these investors are very entrepreneurial and they like the idea to come into new innovative strategies.”

Moretti declined to comment on how much the firm has raised thus far for the vehicle or its terms. He noted that the firm will take a percentage of both the management fee and the carried interest on a case-by-case basis with the GPs, with the majority of such fees staying with the teams.

The relationship is not exactly arms-length

Representatives from Atypical will be part of the investment committees of the managers they back, Moretti said.

Along with regulatory and fund structuring support, Atypical will provide IR and distribution functions to get the fund going. A digital team composed of three senior executives will provide dedicated support for the GPs and their portfolio companies, Moretti said.

“Atypical will also bring deals and origination so it’s much more value-add than a pure seeding platform,” adding that the group aims to be a “service centre” for mid-market managers.