RLH Equity closes Fund III above hard-cap(2)

The mid-market firm surpassed its $350m hard-cap by raising $380m, roughly 30 percent of which has been invested in five transactions.

Los Angeles-headquartered mid-market firm RLH Equity Partners has closed its Fund III on $380 million, well above its $250 million target.

RLH collected more than the fund’s $350 million hard-cap after getting permission from the fund’s limited partners. The firm came to market with Fund III in 2011 and held a first close on about $160 million by the end of the year, attracting commitments primarily from existing investors. The final close amount was split roughly evenly between existing LPs and new investors, and included a general partner commitment of more than 8 percent.

Fund III will continue RLH’s strategy of investing exclusively in the healthcare, business services and government services, RLH managing partner Chris Lewis told Private Equity International.

“The government world is a little bit slower, although we do think there are opportunities from a government services standpoint,” he said. “There is just so much indecision with sequestration going on and the lack of a budget, but we do think the government space still has a lot of opportunities in it.”

RLH targets companies with historical and forecasted annual growth rates of more than 20 percent for both revenue and earnings before interest, tax, depreciation and amortisation. The firm typically invests between $20 million and $50 million per transaction.

RLH’s Fund II collected $265 million in 2007. Limited partners in Fund II include the Los Angeles County Employees’ Retirement Association, the Maryland State Retirement and Pension System and the Pacific Life Insurance Company, according to Private Equity International’s Research and Analytics division.

“We lost several LPs due to Dodd-Frank,” Lewis said, referring to banks that had been forced to discontinue committing to private equity funds. 

Limited partners in Fund III include public and private pensions, endowments, insurance companies and high-net worth individuals.

RLH has completed five investments to date from Fund III, representing just under 30 percent of the capital in the fund.

RLH was founded in 1982 and manages more than $700 million of assets.