Hellman & Friedman amasses $11bn for new fund
Overwhelming demand from investors has allowed West Coast private equity house Hellman & Friedman to amass nearly $11bn in four months for a new buyout fund – its largest in its 27-year history.
The fundraiser, the largest started and completed this year, underscores the abundance of liquidity seeking a home as state pension plans, insurers and sovereign wealth funds hunt for better yields amid record low interest rates. The San Francisco-based group also benefited from investors, in the aftermath of the financial crisis, concentrating their bets on the best performing and most consistent managers.
Hellman & Friedman, which mostly invests in the US and in Europe, received more than $17bn in subscriptions in total, according to two people with knowledge of the marketing effort. After scaling back some of its investors’ commitments to $10.3bn, the firm added its own contribution of $500m. Retired partners invested another $150m.
The fund – Hellman & Friedman’s largest since the firm’s inception in 1987 – is 25 per cent larger than its last fundraising in 2009. That pool of money fell short of an $10bn target when the financial crisis froze markets, dealmaking and fundraising activity.
Hellman & Friedman, headed by 49-year-old chief executive Philip Hammarskjold, is the latest of a string of buyout funds exceeding $10bn as investors reinvest returns and distributions from existing buyout funds. In January, Apollo Global Management closed an $18.4bn fund, the largest since the credit crash. Carlyle secured $13bn, Warburg Pincus $11.2bn and Luxembourg-based CVC Capital Partners amassed $15bn.
Investors have been attracted by the consistency of Hellman & Friedman’s returns and its record. It says that it has not lost money on any investment since 1997.
“They’ve consistently been one of our top performing managers through both up and down cycles,” said John Morris, managing director at HarbourVest Partners, a backer. He also cited “a stable team and unique deal flow.”
Hellman & Friedman’s $8.8bn fund, closed in 2009 but invested after 2011, was posting an 8.6 per cent net internal rate of return and marked up a 10 per cent increase in value above cost as of March 31, 2014, according to Washington State Investment Board, a backer.
The previous $8.4bn pool, raised in 2007 at the peak of the buyout boom, returned 12.4 per cent a year after fees for a 60 per cent cumulative gain.
Recent distributions also helped the fundraiser: The group returned $8bn and spent about $3bn over the past 18 months. Disposals included a stake in Sedgwick, a Memphis-based provider of claims-processing services, to New York buyout group KKR, in a deal valuing the whole company at $2.4bn including debt.
Recent acquisitions include a majority stake in Scout24, a German cars-to-real estate online classifieds portal, from Deutsche Telekom, in a €1.5bn deal.