Graham Partners, which just closed its third fund in September, is trying to collect $10 million for an annex to support remaining companies in its vintage 1999 fund that have exposure to the housing market.
The firm has so far raised $9 million for the annex from existing investors in the fund. The capital will be used to support five companies from the portfolio, including funding any add-on acquisition opportunities that may arise.
The companies are not distressed, a source told PEO, but are “directly or indirectly affected by the housing market”, the source said. The annex fund will be used to secure the companies until the housing market rebounds and decent exit values can be achieved, the source said.
“There’s no imminent need for the capital,” the source said.
Investors in the first fund have been paid back the capital they invested. The fund has a gross return of 1.6 times, and has returned 3.1 times on realised investments.
Graham Partners, based in Pennsylvania, raised $515 million for its third fund, which closed in September. The firm’s second fund totaled $465 million. Graham invests in the manufacturing and industrial sector.
Private equity firms have turned increasingly to supplemental or annex funds in the market downturn as a way to shore up existing portfolio companies. The funds also are used to seize investment opportunities for existing portfolio companies in funds that have run out of capital.
Kohlberg Kravis Roberts raised a €400 million annex to its €4.5 billion second European fund earlier this year, and KPS Capital Partners re-opened its third fund this year to existing investors to raise an additional $800 million, bringing the fund total to $2 billion.
More recently, Spanish fund of funds manager Altamar Private Equity collected €65 million for an annex fund to supplement its €420 million buyout fund for investments specifically in secondaries opportunities.