Hg to close oversubscribed fund on £2.5bn – Exclusive

HgCapital is gearing up to hold a final close on its eighth flagship fund on £2.5 billion (€2.94 billion; $3.13 billion) next month, having attracted investor demand in excess of £7 billion, Private Equity International has learned.

HgCapital 8 officially launched in September 2016 with a target size of £2 billion, and held a first close in December on £1.9 billion.

It is understood that the fund received a re-up rate of around 90 percent. HgCapital Trust, the listed entity that invests only in HgCapital’s funds, is understood to have committed £350 million to the vehicle.

Rede Partners worked as placement agent on the fundraise. Both HgCapital and Rede declined to comment.

Investors in HgCapital 8 include Pennsylvania Public School Empolyees’ Retirement System, which committed $95 million, Teacher Retirement System of Texas, which committed $120 million, and Employees Retirement System of Texas, which committed $35 million, according to PEI data.

HgCapital is also racing toward a first and final close for its HgCapital Mercury 2 fund, which focuses on investments in the TMT and tech-enabled services industries. The fund, which launched in November 2016 and is oversubscribed, is on-track to hit its £575 million hard-cap at the end of the first quarter.

HgCapital will be making a GP commitment of at least 2 percent to each vehicle, according to a source with knowledge of the two funds.

The firm’s Mercury fund series writes equity cheques of between £20 million and £60 million. Its first Mercury fund, a 2011-vintage, closed on £380 million.

Last summer it sealed its first exit, offloading Relay Software, a Dublin-based provider of software to the insurance industry, to a US trade buyer in a deal generating a gross IRR of around 40 percent and a 2.2x money multiple, as reported by PEI.

HgCapital is still investing HgCapital 7, which closed on its £2 billion hard-cap in April 2013. There is enough capital remaining to make one to two further investments, it is understood.

On Monday HgCapital announced it had agreed to sell vehicle leasing business Zenith, a portfolio company in its sixth fund, to Bridgepoint in a transaction worth £750 million.

The sale will deliver an investment multiple of 2.9x and a gross internal rate of return of 46 percent, according to a statement from HgCapital Trust.

The Trust, which co-invested alongside HgCapital on the investment, will realise cash proceeds of approximately £59 million on completion of the transaction, it said.

Bridgepoint is currently investing from its fifth buyout fund, which closed on €4 billion in 2015.