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US investors help Oakley break hard-cap on Fund III

A return in LP interest in the European mid-market helped the firm raise €800m for its third flagship vehicle.

Oakley Capital has benefited from a turnaround in appetite from US limited partners for European mid-market funds, which has helped the firm surpass the hard-cap of its latest flagship vehicle.

The London-headquartered private equity firm held a final close on €800 million for Oakley Capital Private Equity III, above the initial €750 million hard-cap. The fund secured a 75 percent re-up rate from investors in its predecessor, a €525 million 2013-vintage, with strong support from US, UK and German institutions.

The firm’s listed private equity vehicle, Oakley Capital Investments, also committed €326 million to the fund.

“We found that some of the US investors have shied away from investing in Europe in recent years but felt that it was an attractive time to begin to look to again in Europe, particularly the mid-market where investors feel that there’s an opportunity,” Rebecca Gibson, partner at Oakley, told Private Equity International.

“We’re becoming more attractive to some of the more institutional funds, for example insurance companies for the first-time and pension funds who might previously have not been so aware of Oakley. We’ve [also] had existing family offices who have shown continued support … [with] significant increases in the capital that they’ve committed to the fund but also from new investors.”

The decision to exceed the initial hard-cap follows an expansion of Oakley’s investment team with the addition of Arthur Mornington and Ralf Schremper as partners in February and April respectively. The firm also made room for “flagship names” that had shown an interest in the fund, Gibson said.

“We felt we had those resources to be able to deploy more capital and looking at the pipeline and the deal flow that we’ve been generating that there was clearly an opportunity to put more capital to work within the fund life,” Gibson added.

Oakley wanted to ensure that investors who had committed to the fund at the outset did not feel the firm was moving away from the strategy it had articulated to them, Gibson said. The firm discussed with its LPs about increasing the hard-cap and was able to balance the desire to have more capital to put to work with any concerns around “stepping it up to too big a fund size,” she added.

Fund III is already 40 percent invested, having completed five deals in education, TMT and the digital consumer sector across western Europe. The firm expects the fund to make around 12 deals in companies with enterprise values between €60 million and €300 million, Gibson noted.

Oakley’s three funds have completed 25 acquisitions with a combined enterprise value of over €4 billion, according to the statement. Since inception, its realised investments have achieved a 44 percent gross internal rate of return, 2.5x money multiple and returned around €780 million to investors.