Ex-Obama advisor nears $1.5bn close for Buffett-style long-holds – exclusive

Cranemere Group has raised capital from a Middle Eastern family office, a public US institution and a UK pension, PEI understands.

Cranemere Group, whose chief executive Jeffrey Zeints advised the Obama administration on economic policy, is close to finalising its capital raise for long-hold investments.

The UK-headquartered holding company has collected around $1.5 billion to invest, according to a source familiar with the matter. It is understood that shareholders include a Middle Eastern family office, a public US institution and a UK pension.

Cranemere acquires equity stakes in US and European private businesses for an indefinite period, similar to the strategy employed by Warren Buffett’s Berkshire Hathaway. It has completed three investments to date, including Texas-based NorthStar Anesthesia, according to a statement.

Cranemere declined to comment.

Operating as a holding company with shareholders instead of LPs means there is no capital gains tax as cash generated by a portfolio company goes straight to the firm, according to Bain & Co’s Global Private Equity Report 2018. Holding companies also have the ability to adapt their strategy as necessary due to a lack of a traditional investment mandate.

Cranemere was founded by Vincent Mai, former chief executive and chairman of AEA Investors, a private equity firm founded to make investments on behalf of SG Warburg & Company, as well as the Rockefeller, Mellon and Harriman families, according to Cranemere’s website.

The group’s chief executive, Jeffrey Zients, was previously director of President Obama’s National Economic Council and acting director of the Office of Management and Budget. Zients is also credited with rescuing the Healthcare.gov website during the rollout of “Obamacare”.

Cranemere has 19 staff across offices in London, Frankfurt and New York, according to its website.

Several investment firms have launched or raised capital for long-hold strategies in the last 24 months. CVC Capital Partners has raised more than €4 billion for CVC Capital Partners Strategic Opportunities II, which targets stable businesses with typical enterprise values of between €1 billion and €5 billion for around six to 15 years, as PEI reported on Friday.

KKR has its $8.5 billion Core Investment Strategy and Blackstone has raised about $5 billion for its Core Equity Partners fund. The Carlyle Group gathered $3.6 billion for its first long-dated fund in 2016 and Apollo Global Management held a $2.2 billion first close against a $3 billion target in August for its Hybrid Value fund.

According to Dechert’s 2019 Private Equity Outlook, 27 percent of GP respondents said they had already established a long-hold fund and nearly one-third were considering it. Investment company-type structures are likely to become more popular as GPs relieve themselves of the pressure of having to invest within the constraints of a fund.