Bain expecting ‘one-and-done’ on Fund XII hard-cap in July

The firm could raise more than $8bn for its 12th flagship fund, according to documents seen by PEI.

Bain Capital is expecting to hold a first and final close on its 12th buyout fund in July on its hard-cap, according to documents prepared for a US pension and seen by Private Equity International.

Bain Capital Fund XII is seeking $7 billion in limited partner commitments, and the firm expects to cap the fund at 10-15 percent above target, implying a cap ranging from $7.7 billion to $8.05 billion, the documents by Portfolio Advisors for Pennsylvania Public School Employees’ Retirement System show.

The firm will make a GP commitment to the vehicle of at least $800 million “to invest in or alongside the fund”, according to a letter from Portfolio Advisors to the PSERS board of trustees.

The fund is expected to make between 15 and 20 investments, writing equity cheques ranging from $200 million to $500 million, with the ability to pursue transactions up to $1 billion. It will primarily seek investments in North America-headquartered companies and may make investments elsewhere.

The documents, in which Portfolio Advisors recommends PSERS to commit up to $150 million to the fund, show that Bain typically underwrites its investments to target at least a 20 percent gross internal rate of return and a 2.5x gross multiple of money.

According to the documents, Bain “improved” its fee and carry structure starting with the $6.5 billion Fund XI, creating “two distinct classes of investors with different management fee and carry percentage”. Class A investors will pay a management fee of 1.5 percent and 20 percent carried interest, while Class B investors will pay a management fee of 0.75 percent and 30 percent carried interest.

The documents did not include any information about the fund’s preferred return hurdle. 

Fund XII “may make investments using either equity and/or debt instruments. The fund may also make investments in temporary (i.e. bridge) financing instruments too,” the documents note.

The length of the fund’s bridge financing facility was undisclosed.

According to the documents, since 2012 PSERS has committed $330 million to three Bain Capital funds: Bain Capital Fund XI, Bain Capital Asia Fund II and Bain Capital Asia Fund III. As of 31 December Bain Capital Fund XI generated a 28.4 percent net IRR and a 1.44x net multiple on invested capital for PSERS.

In early June PSERS posted first-quarter 2017 performance figures showing that an allocation comprising private debt, private equity and venture capital delivered a return (net of fees) of 2.5 percent in the first three months.

The same allocation is delivering: 9.9 percent for the fiscal year to date (ending 30 June); 11.5 percent over one year; 6.4 percent over three years; 9.2 percent over five years and 7.9 percent over 10 years, as reported by PEI.

The private markets allocation accounts for $7.7 billion (14.9 percent) of PSERS’ total net assets of $52.7 billion. The total fund delivered a return of 3.26 percent for the first quarter and is delivering 8.42 percent for the fiscal year to-date.

The private markets allocation has been at or around its current level since 2014. In each year between 2010 and 2013, the allocation was just over 20 percent of the fund total.

Bain Capital declined to comment.