Estancia seeks $350m for third flagship fund

The manager looks to capitalize on shifts in asset management and related technologies.

Financial services specialist Estancia Capital Partners is seeking at least $350 million for its third flagship fund, according to a presentation from Chicago Teachers Pension Fund.

Financial services funds may prove advantageous for investors as the industry adjusts its infrastructure in response to changes in wealth and asset management, regulatory policies and a need for updated technologies.

Details about Estancia’s third fund were included in board documents for Chicago Teachers Pension Fund’s investment committee meeting scheduled for May 23. Buyouts reviewed the documents.

Chicago Teachers’ staff is recommending a $10 million commitment to Estancia’s third fund. The system made a $10 million commitment for Estancia’s second fund in 2019.

According to a presentation from Chicago Teachers’ investment staff, Estancia makes buyouts investments in lower middle-market wealth management firms and financial industry technology providers.

The third fund has a 10-year term with two one-year extensions at GP discretion and LPAC approval, the presentation said.

Estancia will charge a 2 percent management fee during the four-year investment period and 1.75 percent of invested money after, the presentation said. The fund will have a 20 percent carried interest rate and 8 percent hurdle.

The fund uses a European-style distribution waterfall model. Estancia is offering to reduce the investment period management fee to 1.9 percent for investors who participate in the first close, according to the presentation.

The presentation also said the financial sector has strong tailwinds in regulatory technology, financial technology infrastructure and asset management firms. Estancia’s first fund largely invested in wealth and asset management firms, according to its website.

In its second fund, Estancia has largely focused on companies that provide various technology services for financial institutions and wealth management firms. One example is InvestorCom, which provides software used by asset managers for regulatory compliance, according to Estancia’s website.

According to Chicago Teachers’ presentation, Estancia has $420 million in AUM.
In Fund III, Estancia plans on making between eight and 12 platform investments between $20 million and $70 million each, including control and non-control investments.

Chicago Teachers committed $10 million to Fund II, according to the presentation. Other LPs known to have invested with Estancia’s prior funds include City of Philadelphia Board of Pensions & Retirement, Los Angeles Fire & Police Pension System, Illinois Municipal Retirement Fund and GCM Grosvenor.

Fund I, which closed in 2011, invested $154 million in eight portfolio companies, according to the presentation. To date, Estancia has made three exits from Fund I and returned 1.54x net multiple on invested capital.

Fund II, with a 2019 vintage, raised $240 million. According to the presentation, that fund has invested 58 percent of its capital, and its five investments have earned a net IRR of 22 percent.

Founded in 2010, Estancia is based in Scottsdale, Arizona and Philadelphia. The company’s co-founders are Michael Mendez and Takashi Moriuchi. Mendez was previously president of NWQ Investment Management Company. Moriuchi was an executive director at Morgan Stanley and a principal at Lovell Minnick Partners.

Estancia did not respond to a request seeking comment.