The Illinois State Board of Investment will pledge $20 million to Valor Equity Partners’ Fund III, but only after two other institutional LPs commit to the fund, and only after the fund reaches $150 million, according to board documents that were released as part of a public records request from Private Equity International.
If Valor Fund III does not raise at least $200 million, then the Illinois Board will lower its commitment to 10 percent of the total fund, according to the system. The commitment will close within nine months, also under the condition that the Illinois State Board is offered an LP advisory committee seat at Valor.
Valor Fund III is targeting $350 million and expects to hold its first close on 30 September, according to a board presentation that was released as part of the records request. The management fee on Fund III is set at 2 percent, and Valor will kick in an at least 4 percent GP commitment, the documents said.
Fund III’s preferred return is 8 percent and the fund is structured with a “European-style” waterfall distribution model, under which the GP will only start to receive carried interest LPs receive their aggregate capital on realised investments, write-downs and an 8 percent preferred return, according to the pension fund.
Valor was unavailable to comment at press time.
Valor’s third vehicle will seek investments in growth stage companies in lower-mid markets. The firm will focus on North American companies in the consumer, infrastructure and industrial services and manufacturing sectors, according to the presentation. Target companies should generate between $30 million and $200 million in revenue. The targeted investment size will range from $10 million to $35 million each, the presentation states.
Fund II, a 2007 vintage, closed on $303 million. The firm’s current portfolio includes Chinese restaurant company Fast Gourmet Group and California-based Tesla Motors. But last year Valor faced issues with Smiles Dental Center. The dentistry company was busted by US health programme Medicaid for “excessive” orthodontic practices, PEI previously disclosed.
Valor was founded in 2001 by chief executive officer Antonio Gracias, former founder of MG Capital, according to Valor’s website.