New Mountain preps Fund III amid surging LP demand

The New York firm, led by former Forstmann Little pro Steven Klinsky, has set a target of $3 billion for its next private equity fund as LPs clamour for allocations.

New Mountain Capital, founded by Steven Klinsky in 1999, is preparing to begin taking commitments for its third private equity fund.

The vehicle has a target of $3 billion, but given the demand from current New Mountain limited partners, it is expected to quickly raise in excess of that number. New Mountain’s previous private equity fund closed on $1.55 billion in 2004, although it saw approximately $4 billion in LP demand. The firm closed its first fund in 2000 on $770 million. The California Public Employees’ Retirement System was a key original backer of the firm.

In a 2005 interview with Private Equity International magazine, Klinsky said, regarding the size of his most recent private equity fund: “We can put out unlimited amounts of money. But the question is, can we put out unlimited amounts of money at our quality standards?”

Since then, New Mountain has launched an affiliated public markets fund called New Mountain Vantage, designed to take further advantage of the research done by the firm into chosen sectors.

New Mountain now has roughly 30 investment professionals.

Klinsky was a partner at legendary buyout firm Forstmann Little until 1999. He left just before the firm, founded by Ted Forstmann, embarked on an ultimately disastrous programme of telecommunications PIPE deals. Two investments in McLeodUSA and XO Communications led to multi-billion-dollar losses, a lawsuit from LP the State of Connecticut and Forstmann’s decision to wind down the operations of the firm.