In January, Texas-based energy investor Rockland Capital closed its debut institutional fund on $333 million, after being in market for more than two years. The firm generally targets power plants that it believes can be operated more efficiently.
There are a lot of LPs that just won't consider you because you're a first-time fund.
“We understood that there was a fair amount of risk in raising a first-time fund, and that many first-time funds don’t ever get raised,” says Rockland partner Shane Litts. “There are a lot of LPs that just won’t consider you because you’re a first-time fund.”
Prior to Rockland’s first institutional fund, the firm operated a “pledge fund”, investing on a deal-by-deal basis. All six investors that participated in the firm’s pledge fund committed to Rockland’s debut institutional vehicle, which altogether had roughly 30 limited partners.
Rockland’s first investment from its debut fund was for an interest in California’s La Paloma Generating Plant.
SK Capital Partners spun out of Arsenal Capital in 2007 and closed its first institutional fund on its $500 million hard-cap in August, just seven months after it launched. SK targets the specialty materials, chemicals and healthcare sectors and focuses on companies in the lower mid-market. “We were very pleased with the reception we received and obviously how quickly we were able to close the fund,” says managing director James Marden.
“I think a lot of it had to do with the market right now, which seems to be focused on middle to lower middle market sector focused [funds],” Marden says, “but particularly GPs that have invested and operated successfully in those sectors over a long period of time.”
One aspect of SK’s fund that helped attract LPs was the general partner commitment of higher than 1 or 2 percent, Marden said. “We made an above-market GP commitment and that’s because we wanted to deploy our own capital in our deals,” he said. “Nobody asked us to do it.”
The firm’s first two funds were special purpose vehicles used to buy one company each.
EIG GLOBAL ENERGY PARTNERS
EIG Global Energy Partners, the Washington DC-based energy and infrastructure fund manager that was part of TCW until October 2009, closed its debut fund on $4.1 billion in May.
“We were expecting that it would be challenging for us and in fact it ended up being the exact opposite,” says chief executive Blair Thomas. “Being independent ended up being a big positive.”
Although this is the first fund raised under the EIG name, it’s the team’s 15th fund. EIG secured its independence from Los Angeles-based asset manager TCW (which also gave birth to Oaktree Capital Management) in December 2010, following a 14-month transitional period.
Thomas says some of EIG’s fundraising success can be attributed to coming to market at the right time. “It just so happened that energy is one of those sectors where investors are looking to increase their exposure.” About 45 percent of the capital came from foreign (mostly European) investors, according to Thomas – a higher proportion than its previous funds. EIG also offered limited partners 100 percent of the deal fees, while prior funds had typically divided deal fees on an 80 percent/20 percent basis.
M&M is the hotly anticipated new fund launched by Dominique Megret and Bertrand Meunier, who were the two senior figures at French buyout firm PAI partners before leaving the company abruptly in 2009.
Megret, formerly PAI’s chief executive officer, and Meunier, who was a senior partner, are thought to be targeting a fund of more than €1bn – a sizeable sum for a debut fund, particularly in the current conditions.
The two men are highly regarded in LP circles. Their unexpected exit from PAI reportedly caused investors to pull about half of their capital from the firm’s fund. And most of the lucrative exits that PAI has enjoyed in the last couple of years – for instance the €2.1 billion sale of engineering company Spie to a private equity consortium – were from deals agreed during the two men’s period at the helm.
Reports suggest M&M may end up being a direct competitor to PAI. So it will be interesting to see how many of Megret’s and Meunier’s previous investors follow them to their new fund, and whether those that do will pass on PAI’s imminent fundraising as a result.
Northedge, a new firm that will target lower mid-market deals in the North of England, is currently in the market for its debut fund. The firm launched its formal fundraising process in April, and is likely to hold a first close towards the end of this year, according to LPs. It is targeting about £200m, which would make it one of the biggest regional funds of this type.
Investors said they were attracted by the strong track record of the principals behind the firm.
Chairman Michael Joseph, managing partner Grant Berry and chief investment officer Andy Ball all worked together at LDC, the private equity captive of Lloyds Bank, which has had some conspicuously successful deals in the region – including hair styling business and travel management company ATP International. Sources suggested that the principals’ strong local relationships would give them access to off-market dealflow, in a region where relatively few investment professionals are based.
Northedge declined to comment.
An AXA Private Equity spin-out, Paris-based Committed Advisors closed its oversubscribed debut fund on €257 million in July. The fund invests in secondaries in the North American mid-market, targeting investments in fund interests or direct holdings in private companies ranging from €1 million to €75 million.
The firm, founded by Daniel Benin and Barthelemy de Beaupuy, has already closed at least eight transactions. Committed Advisors Secondary Fund I was launched in 2010. The firm did not use a placement agent.
Committed Advisors’ primary focus is on buyout and growth equity assets, but could also look at opportunities in distressed, turnaround, venture capital and sector-specific funds, the firm said.
Benin left AXA last year after co-heading the firm’s New York office, while Beaupuy left from the firm’s Paris office. Former AXA executives JB Stock and Guillaume Valdant also left the firm to join the Committed.
Mary Ma, a former partner and managing director of TPG Capital in China, left the US firm to set up her own venture firm Boyu Capital in March. She was joined by Louis Cheung, former executive director and president of Chinese insurance giant Ping An Insurance, and Sean Tong, a former managing director at Providence Equity Partners.
Boyu is targeting $1 billion for its maiden fund, which will focus on China. A number of Chinese entrepreneurs and Hong Kong-based tycoons have reportedly agreed to commit to the fund.
Ma joined TPG in September 2007. She was previously CFO for Hong Kong-listed PC company Lenovo Group, a portfolio company in which TPG has been reducing its stake since November 2007. Ma played a critical role in Lenovo’s acquisition of IBM’s personal computer business in 2005, which marked the largest overseas acquisition by a Chinese company at the time and was in part funded by a private placement of shares sold by its private equity backers TPG, General Atlantic and Newbridge.
Cheung held various senior positions in Ping An since joining in February 2000. Prior to that, he was a global partner of McKinsey & Company, advising financial services clients across Asia. Tong joined Providence in September 2008 from General Atlantic, where he had been a managing director since 2000.
HAHN & CO
Scott Hahn is a familiar figure in South Korean private equity. Previously the managing director and chief investment officer of Morgan Stanley Private Equity Asia, Hahn is now targeting $600 million for his maiden fund focusing on buyouts in Korea.
Singaporean sovereign wealth fund Temasek Holdings has signed on as a cornerstone investor, committing $250 million, according to industry sources. Fund of funds Asia Alternatives has also made a commitment of an undisclosed size.
Hahn joined Morgan Stanley in 1994 and was based in the firm’s Seoul office. In addition to his role as the chief investment officer of MSPE Asia’s entire business in the region, Hahn also led its transactions in South Korea, historically a favoured destination for the firm.
Hahn’s investments during his time at Morgan Stanley include Landmark Investment Trust Company, an asset management firm that it sold to ING in 2008; Ssangyong Corporation, a trading company; Hyundai Rotem, a joint venture with the Hyundai Motor Group, which manufactures engineering and defence equipment; and Jeonju Paper, (formerly Norske Skog Korea), a manufacturer of newsprint and specialised paper.
Mexico-city based EMX Capital was previously The Carlyle Group’s Mexico investment team but went independent in 2009 and raised its $127 million debut fund in March, mostly from Afores, Mexican pensions. EMX’s debut fund was placed by Deutsche Bank, as funds in Mexico are required by law to use a placement agent.
The firm targets investments in family-owned businesses looking for liquidity, companies in industries that are consolidating, financial restructurings and growth investments.
If you wanted to give me $500 million today, I would not take it, because we won't be able to invest it in a rational way.
“I think once people meet us and really have the chance to discuss the dynamics and the investment thesis they really are convinced that we are unique,” says EMX senior managing director Joaquin Avila. Avila ran Carlyle Mexico Partners, a $134 million fund raised in 2005.
“One of our differentiating factors that the Afores really liked was that rather than just shooting for the maximum amount of money, we were very clear that the opportunity in the market in Mexico is between equity tickets of $20 million to $30 million,” Avila says. “If you wanted to give me $500 million today, I would not take it, because we won’t be able to invest it in a rational way.”
The firm’s investment focus is about capitalising on the rapid growth of the middle class. “It’s relatively easy to generate value by making companies grow, bringing in corporate governance, expanding into other markets,” he said. “There’s opportunity to make real returns.”
Brazil-based Vinci Partners closed its debut fund on $1.4 billion in July. The firm was formed in 2009 by former partners of Banco Pactual’s private equity arm, who left the bank after UBS sold it in 2009. The Vinci group had managed all private equity investments done by Banco Pactual since 2001, equating to investments of more than $1.2 billion across four funds.
Vinci Partners is a generalist investor focused specifically on Brazil. “We invest based on themes that we believe will provide investment opportunities with higher growth rates than the average of the overall economy,” Carlos Piani, the firm’s co-head, says. “We at Vinci believe that for this vintage – or even a couple vintages in the short term – you can add value to companies in different sectors [by] applying common, modern management techniques, given that the productivity level in the overall Brazilian economy is still very low.”
Vinci Partners was able to avoid handing over a measure of control to its Brazilian LPs – which generally demand a more active say in investment decisions than traditional LPs would require – because “we have been in this industry managing capital for long periods of time”, Piani said. The partners of Vinci are together the largest single investor in the fund.