Legg Mason spin-out finds $225m

Calvert Street Capital Partners closed on $225 million (€186 million) for its latest fund, Calvert Street Capital Partners III, the Baltimore-based group’s first investment vehicle since splitting from Legg Mason in 2003.

The firm’s $225 million take exceeded Calvert Street’s initial target, which had been set at $175 million.

Josh Hall, senior managing partner, Calvert Street Capital Partners

According to Josh Hall, a senior managing partner at Calvert Street, the new fund reached beyond the firm’s normal population of high-net worth limited partners to include institutional investors, such as the State of Maryland, DuPont Pension Trust and Travelers Indemnity Co. of Connecticut. Other investors include Ohana Holdings, Quellos Group and ManuLife among others.

Overall, roughly three quarters of the capital came from new institutional investors, while the balance was provided by existing Calvert Street LPs, primarily of the high-net-worth variety. Probitas Partners served as the placement agent for the fundraising.

Regarding the makeup of Calvert Street’s investor base, Hall told PEO, “Our first two funds were made up of largely high-net-worth individuals. There were some institutions in the second fund, primarily banks, but with this latest fund we brought on a lot of new institutional investors.” He added that the new fund also logged a significant number of re-ups from existing investors.

Fund III is actually the fourth fund Calvert Street controls, including two previous private equity vehicles and an SBIC mezzanine vehicle, the $120 million Legg Mason Mezzanine Fund. Calvert Street’s previous private equity fund was raised in 2000 when it closed on $100 million of capital.

Calvert Street targets the smaller end of the middle market, a focus Probitas partner Craig Marmer, who worked on the fundraise, credited with helping to drive institutional interest. The firm invests in businesses with revenues of between $20 million and $100 million, and operating profits ranging from $5 million to $10 million. Calvert Street will write equity cheques of between $5 million and $25 million per transaction, although the group will pursue larger deals with select co-investors.

Past investments for the firm include buyouts of commercial printing outfit Universal Press, lawn and garden product maker Jolly Gardener Products and health benefits provider Performax.

The group is led by Hall and Brian Mahoney, who both serve as co-founders and senior partners at Calvert Street. The firm’s mezzanine group, meanwhile, is led by managing directors Andrew John and Steven Axel.

Wilmer Cutler Pickering Hale & Dorr served as legal advisor to the fundraising.