KeyCorp Spin-Out Plots New Fund of Funds

Cuyahoga Capital Partners LLC is in the preliminary stages of planning a fundraising for a new fund-of-funds vehicle focused on mid-market and lower mid-market buyout funds, a source with knowledge of the firm’s plans told peHUB sister publication Buyouts.

The fund also will seek to back emerging managers. The Cleveland-based firm has not yet set a target for the fund.

Cuyahoga Capital is also reportedly already seeking $125 million for a secondary fund, Cuyahoga Capital Partners IV LP.

The firm recently spun out of KeyCorp, the Cleveland banking company, for which it managed a fund-of-funds group called KCC Management LLC. Managing partners Bart Shirley and Chris Hanrahan lead Cuyahoga, which has five investment professionals.

Cuyahoga Capital, which formally began on Jan. 1, will manage the funds KCC Management raised. These include a primary fund of funds, KCC Emerging Buyout Partners LP, which closed in 2009 with $70 million in commitments and will be renamed under the Cuyahoga Capital banner. KCC Management had also raised three secondary funds, the most recent of which closed at just under $60 million in 2008.

Shirley started conversations with KeyCorp about spinning out back in 2009, when it was becoming increasingly apparent that the bank, like many of its peers, would begin refocusing on its core businesses as it coped with the financial downturn. KeyCorp’s stock price, for example, had traded around $35 a share in 2007 and plummeted to around $5 a share in March 2009.

The evolution of the Dodd-Frank financial reform bill encouraged that sentiment thanks to the so-called Volcker Rule, which makes it difficult for banks to be associated with private investment funds. “At that point we knew there was no way we could continue our strategy with Key,” Shirley told Buyouts.