A new Conning Capital Partners fund will invest in financial technology companies and draw on the knowledge of its primary investors financial companies to guide some investment decisions.
The MetLife Inc. unit has secured $276 million for its sixth private equity fund from financial institutions worldwide. In addition to Conning and MetLife, investors include Chase Manhattan Corp., CIBC Capital Corp., Banc of America Equity Partners, Axa Colonia Lebensversicherung AG, MBIA Insurance Corp., Royal and Sun Alliance USA, Sun Life Financial, Aegis, and Western World Insurance Group.
Part of the strategy is to encourage investors to use the technology of companies in which the fund invests.
We try to tie the portfolio company with a limited partner so it can act as a source for capital or technology, act as a customer or a supplier, and help with technology development, said John B. Clinton, a managing partner at Conning.
Conning often sets up meetings between the limited partners and the companies in its portfolio. It recently brought together a group of 75 people Conning partners, portfolio company executives, and investors.
(FT Ventures of San Francisco, begun about two years ago by former executives of Montgomery Securities, has a similar agenda. Twenty-one financial institution partners, including Credit Suisse Group, Bank of America Corp., Bank One Corp., Deutsche Bank AG, and Wells Fargo & Co., invested a total of $200 million in the groups first fund. The fund has invested half in 19 U.S. and Canadian companies, including 724 Solutions Inc., Financial Engines Inc., Corillian Corp., BlueGill Technologies Inc., and Valicert Inc. FT expects to raise $400 million in its second fund, which is ongoing.)
Mr. Clinton said that financial technology companies are a good investment right now. Financial services is a big part of the economy and going through a lot of change with the repeal of the Glass-Steagall Act, he said.
Theres a shifting of wealth in the marketplace, Mr. Clinton said. All markets are driven by the Internet and financial services are especially positioned to take advantage of new technology tools.
Conning specializes in funds focused on the insurance, banking, and brokerage sectors but has made some financial technology investments through its five other funds.
It invested in Telebanc Financial Corp. in February 1997, when the telephone- and Internet-based bank had $600 million of assets. E-Trade Group Inc. acquired Telebanc in January in a $1.1 billion stock deal; as of Sept. 30 the renamed E-Trade Bank had crossed $11 billion of assets.
Telebank was reflective of our investment style a company that took advantage of technology to change its way of doing business, said Steven Piaker, a Conning partner.
Conning invested $5 million in Home Financial Network in January 1997. Sybase Inc. acquired it last December for $130 million in a stock and cash deal and changed its name to Financial Fusion.
Home Financial was another great example of a company that had put together great technology and applications, and yet was forward-thinking enough to see it needed to attach itself to a larger base to help with distribution, Mr. Clinton said.
Weve been fortunate to have a number of companies that have been quite success driven and have shown good returns for the funds, he said.
Since 1985, Conning has raised more than $630 million and has invested more than $450 million in 54 financial services companies. Its funds, which usually last seven to 10 years, have an average 25% to 30% gross compounded return before fees and management, Mr. Piaker said.
Conning invests between $5 million and $25 million in a company, he said.
Conning Capital Partners, based in Hartford, Conn., is part of MetLifes Conning & Co.