Invesco (IVZ) and its WL Ross & Co. private equity affiliate have put together a consortium, with $1 billion of cash on hand, to participate in the U.S. Treasury’s Public-Private Investment Partnership program, company officials said today.
The Treasury will choose an initial round of roughly five applicants for the program by mid-May, and Invesco executives said they believe their consortium has both the investment expertise and broad composition of investors the government is looking for.
In a telephone interview, Martin L. Flanagan, Invesco’s president and CEO, said the consortium’s existing $1 billion, from a $4 billion distressed debt private equity fund that WL Ross closed in 2007, would just be “a starting point.”
He said there has been strong interest in the program from public pension funds, endowments and foundations, among other institutional investors, attracted, in part, by non-recourse government financing that would allow up to six times leverage on that private capital.
Such leverage enhances potential returns, but it also “measurably” reduces the margin for error on making investments, said Wilbur L. Ross, chairman of WL Ross. Mr. Ross said his firm’s distressed debt expertise and parent Invesco’s fixed-income prowess should leave the consortium well-placed to avoid potential minefields.
Mr. Flanagan said the consortium, which includes women-owned and minority-owned firms, should meet another Treasury goal of allowing as broad a range of clients as possible to benefit from the PPIP program.
Along with Invesco and WL Ross, the consortium includes the LeFrak Organization, a property developer and owner, and two companies in which WL Ross has invested: subprime mortgage servicer American Home Mortgage Services and Assured Guaranty Ltd., “a leading monocline insurer with proven risk management of commercial and residential mortgage-backed securities,” according to an Invesco news release.
Also included are Muriel Siebert & Co., a “leading woman-owned securities firm,” and minority-owned financial firms Williams Capital Group and Jackson Securities, an affiliate of Atlanta Life Financial Group.
The Treasury Department is expected to select managers for the program next month.