With the Aquiline Financial Services Fund, the company seeks to occupy a unique niche among private equity firms. "Aquiline's investment approach to private equity is differentiated by investing globally, across all industries and businesses in the financial services sector, including property and casualty insurance, banking and specialty finance, securities, life and health insurance, asset management and transaction processing.," explains Geoff Kalish, Senior Principal. We're trying to be the alpha for investors looking to add diversification to their private equity portfolios. Our specialized focus means that they can turn to us for non-correlated returns.
The fund is also diversifying geographically, primarily investing in North America and Western Europe, but also reviewing opportunities in China, India, and Latin America. Aquiline's investments include Bermuda based reinsurer Validus Holdings (which filed for an IPO in January), Dublin based Structured Credit Holdings, and recently announced Ark Syndicate Management, a Lloyd's based underwriting agency. While the fund's first three investments are start-ups, Aquiline's Principals are also looking at buyouts and providing growth capital to existing businesses. They are seeking management teams that may benefit from the knowledge and expertise of the firm's principals.
Kalish emphasizes that investing in the financial services sector requires a particular kind of expertise. "The financial services industry is subject to intense regulation with different accounting standards. In addition, the industry tends to be an insular network of contacts, which typically discourages generalist funds from focusing on the sector. You can't take the executive of a manufacturing company and turn him or her into the CEO of a bank or insurance company."
All of Aquiline's principals have spent their entire careers in financial services. Prior to joining Aquiline, Kalish Co-Founded Venturion Capital, a financial services private equity firm, with Aquiline Principals Matthew Grayson and Bruce MacFarlane,. In addition to Greenberg, other principals include Ian Smith, Greenberg's predecessor at Marsh & McLennan; Christopher Watson, a former President and CEO of Gulf Insurance Group; and Laurent Bouyoux, the Founder of ProCapital, a Paris based securities processing firm.
Kalish wouldn't discuss any investors in the new fund, although a 2005 Form D filing at the SEC identifies AXA Private Equity-affiliated Matignon Developpement 3 as a limited partner, as well as CDP Capital, the investment arm of Canadian pension Caisse de depot et placement de Quebec. It has also been reported that the South Carolina Retirement System Investment Commission is an investor, committing $100 million to the new fund.
Needless to say, Aquiline has been gratified by the reception the fund has received, and the implicit endorsement of their focused investment approach. Kalish offers this advice for others seeking to launch industry-specific funds: "Be persistent. The bulk of private equity is still committed to generalists, which means that there are tremendous opportunities out there for sector funds."