Tower Square Fund IV is managed by Babson Capital Management. The fund is targeting $1.6 billion for lower mid-market mezzanine investments and must raise at least $750 million for Louisiana Teachers to commit $75 million, according to the documents.
Babson has negotiated “favourable terms” for Fund IV, which Hamilton Lane cited as a key driver behind the commitment.
Tower Square Fund III closed on $1.6 billion in 2008. The fund had generated a net internal return rate of 9.9 percent and a 1.2x multiple as of 31 December 2012. Of the 87 investments made by the fund, 14 have been realised.
Fund II closed on $1 billion in 2006. Babson’s debut fund raised $266 million in 2002.
Tower Square typically invests between $10 million and $30 million per transaction. Target companies come from a variety of sectors and have enterprise values less than $250 million. Babson “generally seeks to co-invest alongside the general partner”, according to the documents. The firm historically invests about 85 percent in mezzanine investments and 15 percent in equity co-investments.
Babson was formed in 1940 and manages more than $200 billion in assets. It also makes primary fund commitments for insurance company, MassMutual. Babson’s US Mezzanine and Private Equity Group was established in 1992 by Michael Hermsen, who has been with Babson and MassMutual since 1990 and Michael Klofas, who previously worked for MassMutual’s Investment Management Division, according to Babson’s website.
Louisiana Teachers’ had $14.6 billion of assets under management as of 30 June. The pension allocates about 11 percent of its assets to private equity, though its target allocation is 13 percent, PEI previously reported. Recently the fund committed $125 million to CVC Capital Partners’ Fund VI which closed on its €10.5 billion hard-cap in July.