Berkshire's latest fund closes well above previous vehicle

Boston-based private equity firm Berkshire Partners has held a final close for its eighth fund on $4.5bn, making it 45% bigger than its previous vehicle.

Berkshire Partners, a Boston-based private equity firm, has held a final close for its eighth fund on $4.5 billion. That represents a significant 45 percent increase in size compared to its predecessor, which raised $3.1 billion in 2006, at a time when many peers are setting smaller or similar targets to their last funds.

Fund VIII will invest in mid-market companies with acquisition values between $200 million and $2 billion, the firm said in a statement. Berkshire said it aims to invest $50 million to $500 million of equity per investment.

Berkshire could not be reached for comment as of press time. The firm did not use a placement agent to market the fund.

A majority of commitments came from Berkshire’s existing limited partners, the firm said, which include endowments, foundations, pension funds, insurance companies and sovereign wealth funds.

At a time when many LPs are reducing the number of GP relationships, the presence of so many re-ups will act as a vote of confidence in the firm by its investors. Berkshire began marketing the fund in late January, a source close to the firm said.

Although 20 to 25 percent of fund space was set aside for new limited partners, it appears that existing LPs could have filled that as well, the source said.

The fund received commitments from the Pennsylvania State Employees’ Retirement System, the Massachusetts Pension Reserves Investment Management Board and the Tennessee Consolidated Retirement System.

Berkshire closed its seventh fund at $3.1 billion in 2006. As of 31 December, 2010, that fund had generated a 6.9 percent internal rate of return with a 1.1x investment multiple, according to the California Public Employees Retirement System.

The firm's sixth fund, which closed in 2002 at $1.7 billion, has been considerably more successful, posting a 23.9 percent IRR and 1.9x investment multiple.