Highbridge sets new benchmark with $5bn mezz fund

The firm doubled the size of its $2.5bn predecessor fund and has invested more than $1bn in nine mezzanine transactions to date.

Highbridge Capital Management, a hedge fund manager and alternative investment firm owned by JPMorgan Asset Management, has held a final close for its HPS Mezzanine Partners Fund II on $5 billion. 

The fund is managed by Highbridge Principle Strategies, a private equity and credit investment platform launched in 2009 by Highbridge Capital Management, which also owns Brazilian Investment firm Gávea Investimentos.Fund II is understood to be the largest mezzanine fund to be raised since the financial crisis began, trumping GSO Capital Partners’ recent $4 billion mezzanine fund, and the third largest to date. 

Fund II came to market during the first quarter of 2012 and held a first close on roughly $1.9 billion last April. The fund held additional closes in July and December of 2012, collecting between $700 million and $900 million of additional capital each time. Fund II had a rough target of between $3 billion and $3.5 billion, with no hard-cap. 

The fund has made nine investments to date, totaling more than $1 billion. The fund invests in North American and Western European businesses with between $100 million to $300 million in earnings before interest, tax, depreciation and amortisation. Roughly two thirds percent of the capital invested to date has been in North American companies, partner of HPS Scot French told Private Equity International.

The nine portfolio companies include businesses in a variety of sectors, including cable, software, energy infrastructure, healthcare, food services and education, French said. 

Roughly 60 percent of capital in Fund II comes from existing investors. Highbridge’s debut mezzanine fund collected $2.5 billion in 2008. Fund I is fully invested, having completed its last investment in March 2012.

Both Fund I and Fund II have the ability to make equity co-investments in addition to mezzanine loans. Fund I invested roughly 8 percent of its capital in equity transactions. 

Highbridge Capital Management was purchased by JPMorgan in 2009 and manages about $12 billion in Highbridge Principle Strategies, led by chief executive officer Scott Kapnick. 

Highbridge also manages nearly $8 billion in Gávea Investimentos and $10 billion in hedge fund strategies.