Terra Firma holds special accounts talks with SWFs

Guy Hands-led Terra Firma has held exploratory talks with two sovereign wealth funds over the possibility of managing capital on a segregated account basis.

Terra Firma Capital Partners has held early-stage discussions with two sovereign wealth funds which approached the buyout firm with a view to committing capital to a specialist investment fund.

The SWFs, one from the Middle East and another from China, are understood to be interested in Terra Firma managing special segregated accounts on their behalf, having noted Hands' recent comments about fundraising timeframes being significantly drawn out.

Terra Firma has about €700 million remaining in its current fund, according to a source close to the firm, with its investment period due to expire in May next year.

The firm has not yet begun drafting a private placement memorandum for a new fund according to the source.

Managing a sizeable pool of capital for a single sovereign fund would allow Terra Firma to continue to invest through what is currently proving a fallow period for fundraisings.

The talks were apparently “very informal conversations” according to a source with knowledge of the matter, and no figures were discussed in terms of the amount of capital to be committed to the special accounts. Terra Firma is understood to be considering the proposals.

If the plan goes ahead, it would mirror similar developments in the US, where Texas Teachers' Retirement System recently committed $6 billion to just two managers: Kohlberg Kravis Roberts and Apollo Management. The capital will be managed by the two GPs in separate special accounts, and will be invested across a range of alternative asset classes.