Lightyear buys HPM just weeks after closing $950 mln Fund IV

Lightyear Capital, which just closed its fourth flagship fund, has acquired a majority of HPM Partners LLC.

Emigrant Bank, an affiliate of New York Private Bank & Trust Corp, is the seller. The deal closed in December. Terms weren’t disclosed.

HPM’s management and employees are retaining a stake, said Mark Vassallo, Lightyear’s managing partner. The New York buyout shop is acquiring a roughly 50 percent stake in HPM, Investment News said.

HPM, New York, is a wealth manager that serves more than 1,700 clients and has $9 billion in assets under management. HPM stands for Howard P. Millstein, who is chairman, president and CEO of New York Private Bank & Trust.

HPM advises affluent and emerging affluent investors, which Lightyear consider a long-term growth business, Vassallo said.

“People need financial advice more and more every day because of the financial constraints they have every day, [which include] paying for retirement, paying for healthcare for themselves and their children,” Vassallo said. “All of that is growing much faster than the government’s ability to subsidize [healthcare] or [consumers’] own wage growth.”

No job cuts or management changes are expected, he said. “We are very much partnering with management,” Vassallo said.

HPM is the latest investment in the wealth management space for Lightyear. The financial-services-focused private equity firm already owns Advisor Group, which operates four broker-dealers, including SagePoint Financial and Woodbury Financial Services.

Lightyear also owns Wealth Enhancement Group, a provider of financial-planning and advisory services, with more than $7 billion in AUM. In June, Lightyear closed its sale of Ridgeworth Capital Management, which invests bonds and stocks for retail clients, to Virtus Investment Partners for $472 million.

Roboadvisers, which use algorithms to provide investment advice, have been a hot sector for investors.

Earlier this month, Wealthfront secured $75 million in funding led by Tiger Global Management. Betterment in 2016 collected $100 million in a Series E round led by Swedish investment firm Kinnevik, Fortune reported. And IGM Financial invested $50 million in Personal Capital that year.

Lightyear has looked at roboadvisers but hasn’t “found one that’s the right solution of us and our investors,” Vassallo said.

Lightyear targets middle-market financial services, including asset-management, fintech and insurance companies in North America.

The buyout shop used its most recent flagship fund, which closed on more than $950 million in November, to invest in HPM. Lightyear Fund IV has so far done four deals: eCommission Financial Services, Datalot Inc, Ygrene Energy and HPM. Fund IV is one-third invested, Vassallo said.

Jeff Brand, Ed Higham and Liz Nesvold of SilverLane Advisors provided financial advice to Emigrant Bank on its sale of HPM.

Emigrant and HPM could not be reached for comment.

Action Item: Contact Mark Vassallo at +1 212-328-0555

Update: This story has been updated to clarify comment from Mark Vassallo in paragraph 6.

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