Advent International smashed through its $12 billion target to close its eighth flagship vehicle this week on its $13 billion hard-cap in just six months. The firm’s success is testament to investor loyalty and the flight to safety market participants say limited partners are making to insure themselves against any global economic downturn.
“We could have raised quite a bit more,” Advent International’s New York-based co-head of limited partner services Bob Weaver told Private Equity International. “Our investors were keen to have us not over-capitalise the fund. The last thing you want to have is people feel there is too much capital to invest. [$13 billion] is a number that we feel very comfortable with.”
Existing investors accounted for a hefty 90 percent of commitments to Advent International Global Private Equity VIII, which is about 20 percent larger than its predecessor. The fundraising benefited from the post-financial crisis desire of LPs to concentrate their relationships and “do more with fewer investors,” Weaver said.
It was able to hit its hard-cap with no first close and no performance hurdle. “We had closings on a weekly basis beginning in February and finalising in March,” Weaver said. “We essentially allocated the fund once and closed people over a 30 to 45-day period as they were prepared to execute signature pages.”
More than half of the capital came from North American investors, about 20 percent from Europeans and a similar amount from Asia Pacific, slightly up from its previous vehicle, and the remainder from the rest of the world including the Middle East and Latin America.
Weaver attributed the speed of the fundraising to “a bit of a running start with our existing LPs” that had made pre-marketing enquires about fundraising plans and did work early in the process.
He also made a link between its size and its dollar-denomination, a step-change from Advent’s previously euro denominated funds, although as in previous vehicles investors were invited to commit in either dollars or euros. “That is responsive to the fact that in Fund VII the majority of commitments came in US dollars.”
Investors were attracted by the firm’s track record. “There has been a strong bifurcation of the market where you have some fundraises that are going very well and some that are a bit longer in the market,” Advent’s London-based co-head of limited partner services Johanna Barr said. “In a world of uncertainty, we do bring to bear a lot of the operational resources and expertise that portfolio companies can use in the potential down cycle that might be coming, to still out-perform.”
Advent is first across the line of a clutch of managers that include Cinven, BC Partners and Apax Partners, which are all marketing mega-funds.
“Where is your capital safest in private equity?” asked Sunaina Sinha, founder and managing partner of placement agent Cebile Capital. “With the large-cap buyouts, who are the largest and the most diversified, and you’re not more than a certain percentage of the LP base because you’re in a $9 billion fund alongside hundreds of other LPs, and they’re doing tonnes and tonnes of deals so they’ve got 20 partners or 30 partners. Your capital is safest there.”
Advent GPE VIII has yet to make any investments. It will pursue the same strategy as its previous vehicle, undertaking up to 30 deals – which Barr concedes is a larger number than typically targeted by its peer group – investing equity tickets from $100 million to $1 billion.
“The key is we like to focus on the sectors that we are attracted to and not necessarily specific deal size. At the end of the day investors are looking for strong performance and performance over a period of time and Advent has generally delivered that to its LPs.”