CD&R hits $10bn mark on Fund XI

The operationally focused firm is closing in on the $13bn target for its latest flagship during a tough fundraising environment.

Clayton, Dubilier & Rice has amassed $10 billion in LP commitments for its 11th flagship fund, Private Equity International has learned.

The New York-headquartered firm began marketing Clayton, Dubilier & Rice XI, which has a target of $13 billion, to limited partners in January.

The capital comes from a diverse group of investors across North America, Europe, Asia, Latin America and the Middle East and includes endowments and foundations, public pension funds, sovereign wealth funds, family offices, corporate pensions and financial institutions, according to a source from outside the firm with knowledge of the fundraise.

It is understood more than 80 percent of the $10 billion came from existing CD&R investors. The source added that CD&R itself is expected to be the largest investor in the fund.

CD&R held an interim close on Fund XI on about $6 billion in April, a limited partner with knowledge of the firm told sister publication Buyouts.

It is understood the firm will begin deploying capital from the fund in early 2021.

CD&R declined to comment.

CD&R’s success on the fundraising trail thus far demonstrates a flight to quality and brand names as the coronavirus pandemic and its accompanying travel restrictions and social distancing rules make capital raising increasingly challenging.

On Blackstone’s first quarter earnings call last week, co-founder and chairman Stephen Schwarzman said not being able to travel has yet to have an impact on fundraising, adding that one of the advantages of being a long-established firm is “everybody on our side of the table knows everybody well on the other side of the table, virtually every institution in the world”.

“Now, with this whole distance of communication, it’s quite easy to get somebody on the phone anywhere in the world and talk to them and see them. That bond of trust that you have that’s developed over decades really becomes exceptionally useful in a situation like this.”

Blackstone raised $27 billion across its platforms in the first quarter.

Those at the other end of the spectrum, such as first-time funds, are expected to struggle.

“Many LPs are focusing on larger, brand-name firms and/or just re-upping with existing GPs,” Karl Adam, managing director at placement firm Monument Group, told PEI in March. “Further, a difficult macro environment is typically not associated with successful first-time fundraises.”

Having been active in private equity since 1978, CD&R has plenty of experience investing during a downturn. It is understood its seventh flagship fund, raised in 2005, did not sustain any capital losses and its portfolio companies did not trigger any covenants.

Its subsequent fund, the $5 billion Fund VIII deployed during the global financial crisis and the following recession, generated a gross multiple on investment of 3.2x as of 31 December, the source said.

CD&R held the final close on its previous fund on $10 billion in 2017. The vehicle had LP demand of more than $20 billion and received re-up commitments from more than 90 percent of existing LPs, PEI reported at the time. That fund had an initial target of $8.5 billion.

Fund X delivered a since-inception internal rate of return of 20.39 percent as of 30 September, while Fund IX has generated 18.58 percent, according to performance data from the California State Teachers’ Retirement System.