Three banking industry veterans are launching a hedge fund that will bet on banks ripe for consolidation.
The New Ground Capital fund is the brainchild of Philip Sherringham, the former chief executive of People's United Financial Inc., Mark B. Cohen, a former managing director in Stifel, Nicolaus & Co.'s investment bank and longtime bank investor Anton Schutz, president of Mendon Capital Advisors Corp.
The trio see an opportunity to invest in smaller institutions that are facing relentless regulatory, financial and macroeconomic pressures, Schutz told American Banker on Wednesday.
The fund "will take advantage of the huge consolidation wave coming," he says. "We see the industry consolidating from 7,000 [banks] to 4,000 or 5,000 … if you look at the pace of consolidation over the last decade, we see a dramatic pickup."
Another incentive to launch the fund now is bank stocks' generally low level of bank share prices, he added. Schutz, whose Mendon Capital owns shares of companies like Citigroup Inc. and JPMorgan Chase & Co., emphasized that New Ground will focus on small and mid-sized players.
"Our goal is not to buy the Bank of Americas of the world," he says. "This fund will be all about healthy balance sheets and no European exposure."
According to Schutz, longtime investment banker Cohen originated the idea and approached Sherringham, who ran People's United in Bridgeport, Conn. from 2008 to April 2010. The two men then brought in Schutz, who has been investing in banks at Mendon Capital for more than 15 years.
New Ground Capital will officially start operating in early January, and is seeking a total investment from limited partners of about $500 million. It will have offices in New York City, Connecticut and Rochester, N.Y.
Schutz says the fund already has some "soft commitments," but that he hopes to attract investments from other industry veterans: "They get what's about to happen and they get where valuations are today … we're not going to have to go through a vast explanation."