Lightyear poised to raise biggest flagship yet, as Fund V nabs $1.27bn

Lightyear Capital, a specialist in financial services investing, appears on the verge of completing the largest flagship fund in its more than two-decade history.

The New York private equity firm this week filed Form D fundraising documents for Lightyear Capital V and a parallel vehicle showing they and related co-investment pools secured more than $1.27 billion. This includes the general partner commitment.

The offering’s target and hard cap are not known. It is not clear if Lightyear has wrapped up marketing for Fund V. The firm declined to comment.

The amount raised so far makes the fund Lightyear’s biggest ever. Fund V is already 23 percent larger than its predecessor, closed in 2017 at just over $1 billion.

Twenty-four limited partners committed to Fund V and the sidecar. Disclosed LPs include New Mexico Educational Retirement Board, which is investing $50 million. Atlantic-Pacific Capital is the placement agent.

Lightyear was founded in 2000 by Donald Marron, the ex-chairman and CEO of brokerage house PaineWebber. Marron died in 2019. The firm is today led by managing partner Mark Vassallo, another PaineWebber executive who joined at inception.

Lightyear makes mostly control investments in mid-market companies operating across North America’s financial services industry. Key areas of interest include asset and wealth management, banks and brokerage, commercial and consumer finance, financial technology, healthcare financial services, insurance and tech-enabled business services.

Lightyear uses its domain knowledge to source financial services opportunities fueled by business and consumer needs and behaviors, demographic trends, innovation and regulatory changes, according to its ADV filings.

Fund V is expected to maintain this strategy. A report by New Mexico ERB suggested the new flagship might give emphasis to corporate carve-outs, as Lightyear has done more than 20 such deals. It may also pay particular attention to themes like digitalization of finance and growth in independent financial advice.

Lightyear reports closing more than 45 investments since 2000. Its most recent deal, announced last October, saw the firm team up with Ontario Teachers’ Pension Plan to acquire Allworth Financial, a wealth management business. The seller was Parthenon Capital.

Earlier in 2020, Lightyear formed ProfitSolv to buy up billing-focused tech companies in legal, accounting and other professional sectors. It also acquired a majority of HPOne, a digital insurance broker targeting the Medicare market, from Peloton Equity and other investors.

Lightyear-backed Therapy Brands, a payments and software solutions provider to the behavioral health industry, is evaluating a sale, PE Hub reported last month. It could fetch a multiple of EBITDA in the teens to as high as 20x, sources said.

Lightyear Fund IV was earning an internal rate of return of 11.48 percent as of September 2020, according to data compiled by New Mexico ERB. Lightyear Fund III was generating an IRR of 33.10 percent.