MMC Marsh and McLennan Companies Inc

Private-equity firm Aquiline Capital Partners has plenty of capital to take advantage of shifts in the financial services industry, after wrapping up its third financial services fund at over $1.1 billion.

Aquiline Financial Services Fund III LP not only surpassed its $1 billion target, but also exceeded the $743 million that the firm raised for the fund's predecessor back in 2012.

Aquiline, one of only a few private-equity firms focused exclusively on midmarket financial services, was formed in 2005 by Jeff Greenberg, former head of Marsh & McLennan Cos. and son of former American International Group head Hank Greenberg. In its 11 years, Aquiline has invested across a range of subsectors, including insurance, banking and credit, financial technology and capital markets. The firm will maintain the same basic strategy for its third fund, but it will adapt to subtle shifts in the finance industry, Mr. Greenberg said.

"The industries that we invest in are constantly being reshaped, and the changes that occur, whether cyclical or secular, are what create opportunity," Mr. Greenberg said.

For example, Aquiline hopes to take advantage of the insurance industry's shift toward electronic and tech-based operations, financial services companies' growing interest in outsourcing previously internal operations and, potentially, the consolidation of the community banking sector. It also sees opportunities abroad, including in Mexico, Brazil and developing markets.

The New York firm has already backed five companies out of the new fund, using capital it raised through earlier fund closings in 2014 and 2015, according to Mr. Greenberg.

The portfolio includes Ascensus Inc., the second-biggest record keeper for 401(k) plans sponsored by small businesses; Fenergo, a Dublin-based maker of compliance software for the financial industry; OmegaFi, a payments processor for fraternities and sororities; and Wellington Insurance Group, which provides outsourced underwriting for residences.

"Most of what we do is out of the limelight. These are smaller companies and we can be pretty busy without the press or the rest of the world knowing," he said.

In recent years, Aquiline has taken advantage of banks' pullback from lending since the financial crisis to invest in specialty-finance companies. Aquiline made about five investments in nonbank lenders in recent years, including Engs Commercial Finance, a truck leasing company that it backed from its new fund. However, as bank credit continues to improve, specialty finance will likely be less of an emphasis, Mr. Greenberg said.

The firm enjoyed strong support for the new fund from investors in its prior fund: about 90% of investors in the second fund backed its third offering. One such investor is the Oregon Public Employees Retirement Fund, which committed $100 million, the same amount the pension system pledged to the second fund. That fund had generated a 14.2% internal rate of return as of the end of September 2015, according to a pension document.

Mr. Greenberg said the firm's midmarket focus and specialized expertise in financial services resonated with investors. In addition to Mr. Greenberg, Aquiline's senior executive team includes G. Kennedy "Ken" Thompson, former chief executive of Wachovia Corp., who co-heads the firm's banking and credit operations, and Geoffrey Kalish, who leads investments in financial technology and capital markets.

Stanwich Advisors LLC in Stamford, Conn., served as the primary placement agent.

Write to Chris Cumming at Chris.Cumming@wsj.com

(END) Dow Jones Newswires

April 06, 2016 09:45 ET (13:45 GMT)

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