Xponance, Investcorp set $300m target for diversity-focused GP stakes fund

A new offering sponsored by Xponance and Investcorp to make minority investments in diverse and women-owned managers is looking to bring in $300 million.

The target for Xponance Diverse Opportunities Fund was disclosed last month in a report for City of Hartford Municipal Employees’ Retirement Fund. The vehicle’s hardcap is $400 million.

XDO Fund was unveiled last year by the private-market affiliate of money manager Xponance and Investcorp’s Strategic Capital Group, a GP stakes investor, to support diversity, equity and inclusion in the alternative asset industry. To do this, it will focus on GP staking in the mid-market.

GP stakes funds acquire minority interests in private equity firms in exchange for a share of income. Firms sell pieces of themselves to bolster their balance sheets and finance priorities, such as GP commitments to new offerings and growth initiatives.

The space has grown rapidly of late, led by Blackstone GP Stakes, Blue Owl Capital and Goldman Sachs’ Petershill Partners, which account for most deals, many of them backing large shops. GP stakes funds, including Investcorp’s, have more recently penetrated the mid-market, where there tend to be considerably more sellers than buyers.

XDO Fund will bring specific DEI criteria to its GP staking. It will target opportunities across a range of mid-sized managers in which women or minorities are significant owners (at least one-third of equity) or occupy a senior role, such as managing partner, the City of Hartford report said.

The fund’s strategy is to deploy a portion of capital to Investcorp (25 percent of the total), to co-investments alongside Investcorp (42 percent) and to direct minority investments (33 percent). As part of direct activity, it will provide seed capital to the vehicles of diverse and women-owned managers.

XDO Fund’s sponsors

The fund’s investment committee consists of six professionals, divided between Xponance and Investcorp. They include Tina Byles Williams, CEO and CIO of Xponance, and Anthony Maniscalco, managing partner of Investcorp’s Strategic Capital Group.

Byles Williams founded Xponance, formerly FIS Group, in 1996. It is today a $15 billion business offering direct active and passive equity, fixed income and alternative investment solutions. It also features strategies geared to emerging and diverse managers.

Earlier in her career, Byles Williams was CIO of the City of Philadelphia’s Board of Pensions and Retirement.

Investcorp’s GP stakes platform was founded in 2019 by Maniscalco and partner David Lee, both veterans of Anteil Capital Partners, Credit Suisse’s GP stakes unit.

Investcorp created the strategy to acquire minority interests in mid-market GPs, including those specializing in PE, private credit and real estate. It is presently raising a debut offering with a $750 million target. Last year, the fund secured more than $400 million with the help of a large commitment from Eldridge, Buyouts reported.

While Investcorp does not apply DEI criteria to GP staking, it reports that most managers in the portfolio have diverse leadership.

XDO Fund’s launch is perhaps timely. A 2021 report by McKinsey & Company said PE lags corporate America on gender and ethnic diversity in senior ranks. It noted, for example, that in 2020 about 20 percent of executives at PE firms were women while the share in the rest of corporate America was about 30 percent.

Xponance and Investcorp are likely to find a receptive LP audience for the fund. LPs are motivated to find opportunities in harmony with their ESG policies, a trend that is encouraging PE firms to pay more attention to DEI goals in their teams and portfolios.