Specialization Helps Lovell Minnick’s Latest Fund

The firm closed its fourth fundraise with $750M of commitments—$200M above its target. Lovell Minnick’s Bob Belke discusses how its specialization in lower-middle- market financial services companies led to success.

Lovell Minnick Partners closed its fourth fund with $750M of commitments at the end of October, dramatically surpassing its initial target by $200M. The private equity firm, based in Los Angeles and Radnor, Pennsylvania, says it greatly exceeded the $550M goal due to its specialization in lower-middle-market financial services and an established track record.

The institutional buyout fund Lovell Minnick Equity Partners IV includes a limited partner base of pension funds, endowment foundations, fund-of-funds, and family offices. “We really struck a very nice balance in this fund across all those categories,” says Bob Belke, managing director of the firm. “We also have several state pension funds directly invested in this fund, and many repeat investors, so we were really pleased with the quality of the LP base.”

“Investors really like our focus…the fact that we’re in an industry-focused fund—in particular, financial services,” says Belke. “People recognize the complexity of the sector. And they’re increasingly looking for specialization and believe that that will provide added value.” Belke also believes that working with lower-middle-market companies is advantageous, as it’s generally recognized as a place where there are excess opportunities to generate excess returns.

Since its founding in the late 1990s, Lovell Minnick has been a financial-services-focused firm with investment themes centered on investment solutions, underserved credit markets, outsourcing, and consolidation.

“With each successive fundraise, the market has come to recognize that more each time,” says Belke. “And because we’re specialists in the sector, we are much more hands-on. [The] management teams of our portfolio companies appreciate a partner who understands their business and can assist them to grow.”

But things haven’t always been so seamless for Lovell Minnick. The firm raised its last fund during the financial crisis, and didn’t ultimately reach its hard cap because of the macro environment. “We actually did a first close of that prior fund in mid ’08, and we ended up keeping that fund open through the financial crisis into early 2010,” says Belke. “So that was a very challenging time to raise a fund.” Lovell Minnick’s previous fundraise closed with $455M of capital.

Speaking about the current fund, Belke says that the firm is looking to continue making commitments of between $20M and $100M into private financial services companies that want to expand via growth investments, management buyouts, succession and ownership transitions, and recapitalizations.

So far, capital from Lovell Minnick’s fund has been invested in three companies: J.S. Held, a consultant to insurance carriers; LSQ Funding, a provider of working capital solutions through technology; and Worldwide Facilities, one of the largest wholesale insurance brokerage companies in the country.

“The way we have recognized our returns historically, and will continue to do so in the future, will be through helping lower-middle-market financial services companies develop,” says Belke. In several cases, he adds, growth entails significant acquisition activity. “We’re involved in strategy development for those companies, and it’s about really facilitating growth.”