CVC raises €4.6bn for second long-term fund

The final close of Strategic Opportunities II comes amid increased appetite for long-term vehicles.

CVC Capital Partners, Europe’s biggest private equity firm, has held the final close on its latest long-term fund above target.

CVC Capital Partners Strategic Opportunities II amassed €4.6 billion, beating its €4 billion target, according to a statement.

The fund received strong support from Asian institutional investors, Lorne Somerville, co-head of CVC Strategic Opportunities, told Private Equity International. New LPs contributed a significant share of the capital raise, it is understood.

Somerville declined to disclose the names of the Asian LPs. The fund’s investor base includes public and private pension funds, sovereign wealth funds, financial institutions, endowments, foundations and family offices.

CVC’s haul comes amid increased LP appetite for long-life vehicles. KKR raised $8.5 billion last year for its Core Investment Strategy and Blackstone raised about $5 billion for its Core Equity Partners fund the year before. More than 25 percent of GP respondents in Dechert’s 2019 Private Equity Outlook said they had already established a long-hold fund and nearly one-third said they were considering it.

The California State Teachers’ Retirement System committed $232 million, Canada Pension Plan Investment Board invested €250 million, and New York State Common Retirement Fund and Indiana Public Retirement System, €250 million and €80 million respectively, PEI data show.

Somerville said that Fund II had a “wider and more diverse” investor base because of Fund I’s track record.

“The people that came in the first round were pioneers. It was a completely new class and an investor-led strategy, which allowed us to gather a few like-minded people.”

Strategic Opportunities II will follow the same strategy as its €3.9 billion predecessor, backing long-term opportunities in North America and Western Europe. The firm is targeting up to 12 companies with enterprise values of between €1 billion and €5 billion.

The firm already made its first investment from Fund II early this month in Dubai-based private education provider GEMS Education.

Similar to Fund I CVC is targeting annual returns of between 12-15 percent for its latest vehicle, lower than the 20 percent target for its main fund.

Co-investments will remain a very important part of the strategy, Somerville said.

“We’ve delivered over €1 billion of co-investments in the first fund and expect to do at least that in the second.”