Edgewater closes on $714m after three years

The Edgewater Funds, which is backed by investment bank Lazard, closed its third Growth Capital Partners fund on $714 million last week, beating its reduced target of $650 million, according to the firm’s founder and managing partner Jim Gordon.

Chicago-based Edgewater launched the fund in 2008 with an initial target of $750 million, limiting its marketing to existing investors until earlier this year. The firm later lowered its target to $650 million, according to US Securities and Exchange Commission documents.  Gordon did not specify as to why the firm lowered its target.

According to the fund’s 6 June SEC filing, Growth Capital Partners III had only raised $436 million. The firm closed on $714 million last week, Gordon said.

“We really didn’t start any formal fundraising with new clients until this year,” Gordon told Private Equity International.

The firm’s previous vehicle, which raised $476 million in 2006, was generating very positive returns when Growth Capital Partners III’s launched in 2008, according to documents provided by the Teachers’ Retirement System of the State of Illinois. Growth Capital Partners II was posting a gross internal rate of return of 34.6 percent as of October, 2008. The fund’s performance has remained consistent, according to a source close to the firm, generating a realised IRR of more than 60 percent.

“Meeting our target in today’s market was all the more remarkable because we surpassed what we raised even at the top of the market,” Gordon said. 

In September, the firm secured a $20 million commitment from the New Hampshire Retirement System. Other limited partners include Citigroup, Northgate, AmerUS Life Insurance, Yeshiva University, the Georgia Tech Foundation, the University of Notre Dame du Lac, Lexington Partners, WP Private Equity and Stern Private Equity, according to Illinois Teachers’ documents.

The third fund follows Edgewater’s typical investment strategy, which focuses on lower mid-market buyouts and growth equity investments in companies with revenues of $20 million to $500 million and EBITDA between $5 million and $30 million. The firm has already completed five acquisitions through its most recent fund, according to Gordon.

Edgewater was founded by Gordon in 2001 and controls around $2 billion in assets under management, according to its website. Lazard made an investment in the management companies of Edgewater in 2009, taking an ownership stake.

The firm's management retained a substantial economic interest in the firm in the investment. Edgewater also kept their entire management and investment staff in the acquisition.