Montagu Private Equity has held a final close for its fourth buyout vehicle after a rapid seventh month fundraising process. It is one of the largest fundraisings by a European general partner since the credit crisis.
The firm began marketing the fund in September last year, and held a first close just three months later on €2 billion.
The successful fundraising comes despite a difficult environment for firms seeking to raise new pools of capital, with many investors looking to reduce the number of commitments they make and scepticism in some quarters as to general partners’ ability to generate returns.
Montagu’s fourth fund is slightly larger than its third vehicle, which raised €2.26 billion in 2005.
Vince O’Brien, a director at the firm with responsibility for fundraising and investor relations, said the firm had not been tempted to raise more capital, despite the fund being heavily oversubscribed. “Consistency resonates with investors – they see it as a merit that you stick to your strategy. Although the fund was heavily oversubscribed we felt it was important to stick to our target fund size,” he said.
Although it’s a tough market, the demand is there for the right vehicle
O’Brien said investors still backed the asset class. “If you have the right fund, private equity is still an attractive asset class. Although it’s a tough market, the demand is there for the right vehicle. We are well known for having a low-risk approach, investing in defensive businesses that can ride out economic storms.
“Our current portfolio is very strong and has weathered the worst recession any of us have experienced. We’ve shown we’re a safe place to invest and have consistently delivered returns through economic cycles. If you had invested in Montagu funds since 1994, when we first raised third party capital, you would have made, or be expecting to make, a net IRR of 20% plus per annum,” he added.
The investment strategy for Montagu IV was in line with previous funds, O’Brien said. It will target investments in the UK, France, Germany, the Nordic region and also Poland, where the firm recently opened an office.
Probitas Partners acted as global placement agent for the fundraising, with HSBC Trinkaus helping to source commitments from German-based investors and family offices.
Fee arrangements for Montagu IV were “very standard” for the industry and similar to the firm’s last fund, according to a source with knowledge of the process. Montagu declined to comment on fee arrangements. It is understood investors were not offered a discount for committing to the fund early, or for making large commitments. The firm’s employees have made a significant commitment in line with industry best practice, the source said.
Montagu won commitments from 61 investors for Fund IV; 32 were new investors while 29 had previously invested in Montagu funds; 60% of the investors in Montagu’s last fund re-invested in the new vehicle. Investors included pension funds, insurance companies and sovereign wealth funds in the US, Europe, Middle East and Asia, the firm said.