New York-based Blue Wolf Capital Partners has held a final close on $300 million for its Fund III.
Blue Wolf launched Fund III in October 2012 with a $275 million target and $300 million hard-cap. The fund held a first close on roughly $100 million in April. Fund III attracted the majority of capital from new limited partners, primarily US and European institutions such as pension funds, endowments, foundations and fund of funds. US pensions that committed to Fund III include the Employees Retirement System of Texas.
Blue Wolf’s Fund III is more than double the size of the firm’s Fund II that collected $118 million in 2008, though Fund III will continue Blue Wolf’s strategy of investing in companies whose value is “obscured by complexity” in the form of labour relations, government involvement (as a regulator or customer) and/ or financial and operational underperformance.
“We set out to raise $250 million [for Fund II] in 2008 and fundraising was cut short by Lehman Brothers,” partner at Blue Wolf Michael Ranson told Private Equity International. “We’ve been operating with a fund that is smaller than our business plan had expected.”
Blue Wolf has made two investments from Fund III to date, acquiring Suwannee Lumber Company last month and Twin Rivers Paper Company in May. The investments represent less than 10 percent of the capital in the fund.
Fund III is the first fund Blue Wolf has raised since the departure of co-founder Josh Wolf-Powers, who left in late 2010, though the exit did not trigger any key-man issues, Ranson said.
“Josh really stepped out of daily involvement very shortly after the second fund closed, so the success of Fund II – as well as the pre-fund investments – were really attributed to the current investment team,” he said.
In addition to having a larger fund than its previous vehicle, Blue Wolf anticipates making a significant amount of co-investments alongside its LPs with Fund III, something the firm did not do with its previous fund.
“We have a great cadre of LPs who are interested in and geared towards co-investing,” Ranson said.
Stanwich Advisors acted as placement agent for Fund III. Blue Wolf now manages more than $460 million in capital and commitments.