By David French

NEW YORK, (Reuters) – Financial services-focused Private Equity firm Lightyear Capital closed its fifth flagship fund with $1.6 billion. This was a result of investors seeking out capital managers in high-value situations.

Former PaineWebber bankers, including Donald Marron, founded the New York-based buyout business in 2000. It was established after UBS Group acquired the bank.

Lightyear Managing Partners Mark Vassallo and Lightyear said that specialization is a way to tell a different story, which can be good for investors. However, it can also lead to better outcomes and better returns because they understand the industries in which the company participates.

According to Stewart Gross, Managing Director, Lightyear will have greater options to invest in businesses with earnings before interest taxes depreciation, amortization, and amortization (EBITDA), of $30 million to $40 million. This is an increase from its previous flagship fund’s $10 million to $20,000,000 range.

By 2021, Fund V will have around 40% of its assets invested. Gross stated that Lightyear used Fund V to invest in four deals and is now about to conclude a fifth.

To secure greater returns, investors have invested in private equity companies to obtain higher returns during periods of historically low interest rate and easily-available cheap credit.

This large pool of cash has increased the value of businesses that private equity funds typically target and heightened the competition for those assets.

Vassallo stated that Lightyear is pursuing thematic investment within financial services. This includes embedded finance where payment functions are available within non-financial business such as healthcare platforms.

Lightyear can thus not only invest in financial services but also look for smaller disruptive startups to compete with existing investments.

This tactic can also be used to identify businesses that could later be purchased in order to augment an existing Lightyear investment.