Hellman & Friedman closes $8.8bn fund

The San Francisco firm has raised the year’s second-largest fund while also confirming changes to its management team.

Hellman & Friedman (H&F), the San Francisco-based private equity firm, has closed its seventh fund on $8.8 billion – making it the largest fund in its history and delivering a boost to a subdued fundraising market. The firm’s previous fund closed on $8.4 billion in 2006.

The fund will focus on “large-scale, equity-related” investments of between $300 million and $1.2 billion, primarily in the US and Europe. 

Philip Hammarskjold

Reports prior to the financial crisis suggested the firm had rounded up approximately $13 billion in provisional commitments.  Following the drying up of liquidity after the crisis, H&F announced it was setting a target of $7 billion and a hard cap of $10 billion. 

Hellman & Friedman is the 14th largest private equity firm in the world, according to the 2009 PEI 300, PEI Media's proprietary ranking of direct-investment private equity programmes.

The fund saw re-up commitments from 75 percent of existing investors. International investors, including a “substantial” number from Europe, increased their proportion of the fund from around 25 percent to 40 percent of the total.

A spokesperson for the firm said its ability to attract increasing amounts of capital from outside the US was in recognition of the growing contribution of its European effort. H&F has an office in London and has completed a number of investments across the continent.

H&F’s general partners have committed $400 million of their own money to the fund, reflecting the need for private equity firms to demonstrate alignment of interest with investors – an increasing bone of contention in GP/LP negotiations. The firm is applying a 1.5 percent annual management fee and 20 percent carried interest to the fund.

Since the crisis hit, the raising of large funds has become a rarity. In the year to the end of September 2009, private equity firms had raised around $79 billion globally. This compares with $415 billion in the whole of 2008 and $520 billion at the height of the market in 2007. H&F’s fund is the second-largest raised so far this year, just behind the $9 billion vehicle closed by US-based energy specialist First Reserve.   

At the same time as the fund announcement, H&F officially confirmed previously reported management changes. These see Philip Hammarskjold become chief executive, succeeding Brian Powers, who takes the chairman’s role from founder Warren Hellman. Patrick Healy, head of the London office, becomes deputy chief executive.