Now that some of the largest GP stakes managers have gone public, allocators are ponying up money for funds that invest in smaller private equity and alternatives firms.
Investcorp Strategic Capital Group, which takes stakes in general partners, or alternative investment managers, has raised more than $700 million in capital commitments for its inaugural fund, according to people familiar with the firm. So far, the fund, which targets mid-size managers, has made nine investments. An investment consultant, who declined to be named, said the fundraise comes as some investors question whether the large end of the GP stakes business will deliver the same high returns it has in the past. Many think that smaller firms, like the ones Investcorp partners up with, may provide better opportunities. A spokesperson for Investcorp declined to comment.
Investing in GPs through funds — which then take a portion of the high fees earned on alternative investments — has proven to be lucrative. Dyal Capital Partners, one of the pioneers of this strategy, merged with Owl Rock Capital Group and went public via a special purpose acquisition company in May. Dyal is now the GP-stakes subsidiary of the combined company called Blue Owl. Petershill, a subsidiary of Goldman Sachs that was launched in 2007, was listed in London in September. Both sought out large GPs for their portfolios.
In contrast, Investcorp Strategic Capital, run by Anthony Maniscalco and part of the $40 billion manager Investcorp, is looking to invest between $50 to $100 million plus in GPs and is an “active hands-on partner” to generally “younger” firms that want advice on strategy and distribution, including insight into what products investors want, according to one of the people familiar with the business. Investcorp Strategic Capital also advises on operations and succession planning. The alternatives firm is looking for GPs that are at an “inflection point of growth,” according to the source. Maniscalco was co-head of Credit Suisse’s Anteil Capital Partners group and on the investment committee of Blackstone Strategic Capital before joining Investcorp. David Lee, previously head of transactions for Anteil Capital and the head of Asset Management Advisory at Perella Weinberg Partners, also joined Investcorp as founding partner. More recently, the firm hired Kris Haber as chief operating officer and co-head of manager development.
Investcorp Strategic Capital is looking for GPs with between $1 and $10 billion in assets that are still focused on one distinct area, such as private equity or private credit, and are in the top quartile of performance. The firms have generally raised two or three funds already. In general, the firms in which Investcorp has taken a stake were founded in the last five to 10 years. While younger, less mature firms can be riskier, the likelihood of not raising a successor fund is very low once managers have raised a number of vintages already.
Last month, Investcorp took a stake in Warwick Capital. It has also taken stakes in Artemis Real Estate Partners, which invests in both real estate equity and debt; EagleTree Capital, a middle market private equity firm; Marblegate Asset Management, which invests in credit and special situations; and Centre Lane Investments, which focuses on middle market private equity and private credit.