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Permira closes world’s largest buyout fund on €11bn

The London-based buyout firm is closing the biggest fund of all time, although its time in the sun is likely to brief with KKR, Texas Pacific and Blackstone all scheduled to hold final closes soon that will re-write the record book.

Permira, the European large-cap buyout group, has leapfrogged long-established US rivals to hold a first close of the world’s largest fund at a little above €10 billion ($12.8 billion) with a further €1 billion of comitments expected soon.

The additional capital will take the fund to its hard cap of €11 billion or $14.1 billion. Apollo Management closed its record-breaking fund on $10 billion last year.

Gala: a Permira fund III investment

However Permira’s efforts will soon be eclipsed by The Blackstone Group, which is expected to close its latest fund on $15.5 billion; KKR has set a cap of $15.5 billion, while Texas Pacific Group is looking to close on $14.5 billion. All three firms are in the final stages of fundraising.

Permira has held what industry insiders commonly refer to as a ’dry close’ on the new fund: according to a source close to the firm, Fund IV will not begin to deploy any capital until Fund III, the €5.3 billion fund closed in 2003, is fully invested towards the end of the year. Until then, limited partners in Fund IV will not be charged a management fee.

As expected, demand for Fund IV was far in excess of the amount that Permira was prepared to accommodate. This is despite the fact that the fund’s placement document was sent to fewer prospects than the memorandum for Fund III, at €5.3 billion still the fifth largest fund raised by a European group. According to the source, expressions of interest in the new fund added up to €20 billion of investor appetite. 

Existing investors in Permira’s funds account for 87 percent of the capital raised; new investors made up the remainder. Many investors were disappointed by their allocation to one of the top-performing groups, according to one fund of funds manager, which struggled to access the latest fund.

Investors were eager to tap the returns which Permira has generated over time. According to a document seen by PrivateEquityOnline.com, Permira has returned more than €3 billion to investors in the last 12 months, while investing €2.3 billion in new deals.

Its three funds to date have an aggregate net IRR, after fees and carried interest, of 33 percent, generating a gross multiple on realised deals of 3.9 times the orignial investment.