Copper Street gears up to raise first closed-end fund in 2023

Copper Street Capital Fund I will seek to raise between EUR 150m-EUR 200m, with a hard cap of EUR 250m, he said.

The London-based investor, which was founded in 2015 by del Missier, has so far invested from its balance sheet alongside undisclosed co-investors. To aid it in its fundraising foray, the firm welcomes pitches from placement agents, he said.

Ideal investors will be institutional players including pension funds, funds of funds, family offices, and asset managers based across the UK, Europe and the US. A minimum subscription of EUR 10m is preferable, but there will be flexibility in cases where investors may provide EUR 5m with a view to adding another EUR 5m for the final close.

Asked about the firm's outlook on fundraising in the current macro environment, del Missier said: "It is right to be worried about fundraising but it goes hand in hand with the change in the cycle. We are not being unrealistic, that is why we are not going out now. I would expect that things will stabilise throughout the next year; the time to worry is when you are at maximum uncertainty."

He added that the sponsor will not be a "one fund firm" and more funds will be raised in the future.

The sponsor currently invests from a USD 150m alternative open-end investment fund, del Missier said, adding the vehicle typically deploys cheques of GBP 10m-GBP 25m (EUR 12m-EUR 29m) in platform deals. It has a four companies in its portfolio and has made one exit to date – divesting its minority stake in Italy-based mobile payments service provider Satispay to Addition Capital in September 2022.

Investments
Copper Street intends to use around 50%-60% of Fund I to buy a few of its own portfolio companies, which it hopes will attract prospective investors, del Missier said. The firm has plans to make another three to four acquisition by the end of 2023.

Fund I will provide equity cheques of EUR 15m-EUR 50m in exchange for majority stakes mainly and is expected to make six-eight platform investments.

Copper Street has a specialist approach to investment and will target financial services businesses across the UK, Europe and the US. Among its preferred themes is wealth management, a growing area expected to see market disruption, del Missier said. The firm already has in its portfolio One Four Nine, a UK-based independent financial advice and fund management group in which it invested in 2021, and UK-based specialty finance business Lantern, in which it first invested in 2017. The area remains a strategic focus and those businesses will be on the acquisition trail, said del Missier.

Other interesting potential targets include asset management servicing businesses and technology companies that are connected to wealth management and provide operational efficiency, improved risk management and client service, he added.

The holding period for portfolio companies in the new fund will be four-five years. The firm will aim to exit its businesses in sales to trde players or larger financial sponsors, said del Missier.

Upside of the downturn
Copper Street expects an uptick in deal flow in the financial services sector as a result of the downturn. In a recent interview with sister publication Mergermarket, del Missier said many businesses, particularly those that started around the financial crises, have run their course and are looking for investments. "We want to find those businesses that, despite potentially suffering in the difficult macro environment, have real potential and value and just need that extra financial and advisory support to grow," he added.

Consolidation opportunities will be available for companies looking to grow and a number of Copper Street's portfolio companies are on the acquisition hunt, del Missier told Unquote. "Our portfolio companies are at the part of their cycle where they can benefit from a downturn."

Despite foreseeing a recession, del Missier is confident the market will stabilise.

"It is highly likely we will have a recession, but we do not know the depth of it yet. We have lived in a period with artificially low-interest rates and excess paper money and that needs to unwind itself," he said. "Compared to 2007-2009 the banking system is robust and well capitalised and so, the banks will serve as a buffer in a downturn. But we had a lot of leverage in the system and that will be a pain to be absorbed."

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