Advent sets $20bn hard-cap for latest fund

Advent International is targeting $16 billion for its ninth fund and has set the hard-cap at $20 billion.

The target is nearly 23 percent larger than the firm’s predecessor vehicle, which closed on $13 billion in 2016.

The increase in fund size was not a concern for the $24.15 billion New Mexico State Investment Council, which approved a $100 million commitment to Fund IX – a new GP relationship for the sovereign fund – at a 26 March investment committee meeting.

Advent has been a strong performer, and its large investments have outperformed its smaller investments, New Mexico SIC’s director of private equity David Lee said at the Council meeting.

The firm has also increased its headcount to manage larger fund sizes, Advent managing director Robert Weaver told the committee; the firm had 132 investment professionals at the time it closed Fund VIII, which had increased to 156 as of February.

The larger deal team helps the private equity firm “find diamonds in the rough” by reviewing more opportunities proactively and being selective in deals, he said. Advent does not have a chief executive; rather the 15 managing partners oversee all strategic decisions.

Fund IX’s terms are consistent with previous vehicles. Like its predecessors, it does not have a preferred return rate, Lee said.

However, Advent offers protection in a value test: the portfolio must be 130 percent of value before the GP can take carried interest. While not the same as a preferred return, the value test offers the LP a cushion that the GP will not take carried interest before hitting the net asset value of 130 percent, Advent managing director Stephen Hoffmeister said at the SIC meeting.

Advent’s Fund VIII charged 1.5 percent management fees on committed capital during the investment period and 1.5 percent on the cost basis of unrealised investments net of write offs and a 100 percent fee offset, according to New Jersey Division of Investment documents.

Advent, with $38.9 billion in private equity assets under management, manages investments through Global Private Equity (GPE) and Latin American private equity funds.

Advent’s GPE fund sizes have increased steadily. Fund VII closed at $10.8 billion in 2012, Fund VI at $10.4 billion in 2008, Fund V at $3.3 billion in 2005 and Fund IV at 1.9 billion in 2001; Advent crossed the billion dollar mark with Fund III, which closed at $1.2 billion in 1997.

Advent’s latest fund will target between 30 and 35 control-oriented investments in the five industry sectors it focuses on: healthcare, industrial, retail, consumer and leisure and technology, media and telecom.

Fund IX will invest from $100 million and over $1 billion in companies with enterprise values between $50 million and $3.5 billion.

The private equity firm had invested $43 billion in more than 340 investments in 41 countries as of 30 September. More than 52 percent of the investments were in Europe, with 32 percent in North America and 16 percent in the rest of world, according to a presentation to New Mexico SIC.

Advent is currently investing out of Fund VIII, which is approximately 73 percent invested or committed. Recent investments include Aimbridge Hospitality in the US, Prisma Medios de Pagos in Argentina, INNIO in Austria and Manjushree Technopack in India.

Advent’s Fund V generated a net internal rate of return of 42.8 percent and an investment multiple of 2.4x as of 30 June, according to documents from the California Public Employees’ Retirement System.

Advent’s Fund VI generated a net IRR of 17.4 percent and an investment multiple of 2.1x, Fund VII generated a net IRR of 20 percent and an investment multiple of 1.8x and Fund VIII generated a net IRR of 9.9 percent and an investment multiple of 1.1x for the same period.