Sovereign closes fourth fund on £395m hard-cap

Amy King and Ellie Pullen
29 August 2014

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After just four months on the road, Sovereign Capital has held a final close for its latest fund, Sovereign Capital IV, on its ТЃ395m hard-cap.

The vehicle launched in mid-April this year and hit its £350m target in July, according to the firm.

Earlier this year, Sovereign fully realised its first fund, Sovereign Capital I, returning a 3.5x money multiple to its investors. "It was important to show investors a fund track record, rather than just an investment track record," says Michael Needley, partner at Sovereign.

Launched in October 2000 with a target of £100m, the GP's first fund held a first close on £55m in June 2001. The vehicle received commitments from more than 20 international pension funds, insurance companies and endowment funds. Around 60% of the fund was raised in the US, with the remaining 40% of funds coming from Europe, the UK and Japan, according to unquote" data.

Sovereign Capital IV's predecessor, Sovereign Capital III, was launched in 2009 and held a first close in July of that year on around 40% of its £350m target, according to unquote" data. The fund reached its £350m target.

Investors
Sovereign Capital IV received commitments from both new and existing investors in the US, Asia and Europe.

US-based and European investors each contributed a third of all commitments, with the remainder provided by UK-based and Asian investors, according to Needley.

The fund is understood to have achieved a strong re-up rate from existing LPs, some of which wrote larger cheques than for previous vehicles. The vehicle also has a "healthy mix of new investors", according to Needley, welcoming several new LPs that were unable to back previous funds.

According to the fund's filing on the US Securities and Exchange Commission, which was last updated at the end of July, the fund pulled in £85.5m from six US investors.

No cornerstone investors are present in the vehicle, though several LPs have made substantial commitments.

Investments
In keeping with Sovereign's existing investment strategy, the vehicle will commit up to £50m in equity in services-based companies, including business support services, healthcare, education and training. Sovereign aims to grow its portfolio organically, as well as via a buy-and-build strategy.

People
Andrew Hayden is managing partner at Sovereign. Michael Needley, Dominic Dalli, David Myers, Matthew Owen and Kevin Whittle are partners at the firm.