Kelso secures $2bn en route to final close – exclusive

The mid-market investor has set a $2.95bn hard-cap for Fund X, PEI understands.

Kelso & Company, the US mid-market investor, has held a first close on its 10th private equity fund at $2 billion, Private Equity International has learned.

The New York-headquartered firm is expected to hold a final close on Kelso Investment Associates X – which has a $2.5 billion target – in spring 2019, according to a source familiar with the matter. Fund X has a $2.95 billion hard-cap, the source said.

The firm is understood to have made a “substantial GP commitment” to the fund, the source also noted. Employees committed more than 20 percent of the $2.6 billion raised for Kelso’s 2016-vintage Fund IX, according to its website.

Kelso & Company declined to comment.

Kelso’s Fund IX was half the size of Kelso Investment Associates VIII, a 2007-vintage fund that closed on $5.13 billion. Fund VIII had generated a 1.32x total value multiple and a 7.67 percent net internal rate of return as of 31 December, according to a Regents of the University of California document.

Fund IX included commitments from Sweden’s AP Fonden 3, District of Columbia Retirement Board and Michigan Department of Treasury, according to PEI data. New Mexico Public Employees Retirement Association, Finland’s Varma Mutual Pension Insurance Company and Milwaukee’s Northwestern Mutual were also investors.

Kelso was founded in 1971 by Louis Kelso, a pioneer of the employee stock ownership plan, or ESOP, in which employees receive company shares over the course of their employment. The firm raised $5.8 million for its first private equity fund in 1981 and has since invested over $12 billion.

The firm’s portfolio includes Texan asset management platform American Beacon, Pennsylvanian pharmaceutical platform Foundation Consumer Healthcare and Tennessean restaurant chain Logan’s Roadhouse.