DENVER – As Sovereign Financial Services Inc. began pre-marketing its new private equity fund-of-funds, Sovereign New Millennium Fund II, its managing principals decided the vehicle needed a less cumbersome nickname.
They settled on “Millie,” in honor of Managing Principal Mary Kelley’s late mother.
Millie will seek $125 million from high-net-worth individuals, smaller foundations, pension funds and endowments. An offering memorandum was scheduled to be mailed in April, but Sovereign already had $10 million soft-circled by early March, Ms. Kelley said.
Millie’s predecessor, Sovereign New Millennium Fund, which is three-fourths invested, wrapped on $101 million in September (VCJ, September 1998, page 26). The fund-of-funds leans heavily toward venture investments, with 67% of the capital committed so far dedicated to the asset class. Another 20% was devoted to special situations and 13% to buyouts. Ms. Kelley expects the new vehicle also to be weighted toward venture capital.
As of June 30, the first fund-of-funds posted a net return of 39.7%, a figure the firm is pleased with, Ms. Kelley said.
The new vehicle will hold a first close when it reaches $50 million in commitments, likely in the second quarter, and rolling closes will follow. Ms. Kelley said Sovereign would not employ a placement agent to assist with fund raising. “I love smiling and dialing,” she said
Sovereign does not expect the majority of the first vehicle’s limited partners to take part in the follow-up fund because they are smaller investors with less capital to deploy in private equity than larger institutional investors. Some 40% of Millie’s capital will come from previous backers, Ms. Kelley said.
Investors in the first fund include Legacy Healthcare Systems, University of Nebraska Foundation, Charles A. Dana Foundation and the Boettcher Foundation.
Millie features a 1% management fee, which is scaled down for commitments exceeding $5 million, and a 5% carried interest split with a 10% hurdle.