Monday saw reports of two big fundraising efforts by private equity firms. There is speculation that Warburg Pincus might be about to launch a new global fund, which it hopes to raise around $12 billion. Private equity firm Bridgepoint also announced on Monday that it has already managed to raise $4.4 billion with its fifth buyout fund.
Speculation Over New Warburg Pincus Fund
Reuters reported on Monday that Warburg Pincus could be on the verge of launching a new global fund. The news agency cited sources close to the matter who wished to remain anonymous. The private equity firm has so far declined to comment. The $12 billion global buyout fund would follow the firms previous $11.2 billion fund, which was closed just two years ago. The previous fund, Warburg Pincus Private Equity XI, has invested in over 50 deals to date. The average equity commitment, according to Reuter’s sources, has been between $100 million and $200 million.
Warburg Pincus differs from many private equity firms in that it also invests in venture capital and growth equity, as well as the typical leveraged buyouts. This is especially helpful at a time when leveraged buyouts tend to be expensive due to strong equity and debt markets.
Bridgepoint Announces End to Fundraising
Private equity firm, Bridgepoint, provided Monday’s other fundraising news. The firm announced it has managed to raise $4.4 billion (€4 billion) with its latest fund, exceeding its original target of €3.5 billion, according to the Financial Times. Bridgepoint’s fund took much longer from its previous fund than the gap Warburg Pincus may be aiming for. Whereas Warburg Pincus might be about to announce a new fund just two years after it closed its previous fund, Bridgepoint previous fund closed in 2008.
The firm announced the latest fundraising efforts have “benefited from significant recommitment of existing investors”. Their contributions increased by more than 25% on average. The fund will continue to invest in mid-market European companies, with values over €200 million. The firm has made the first buyouts from the fund already, as it acquired the ASK and Zizzi Italian restaurants in the UK.
Fundraising Fuelled by High Returns
The low interest rates of recent months have helped fuel the fundraising efforts. Institutional investors are receiving record returns from existing funds and are eager to reinvest their equity. Company valuations are currently high, which has helped many private equity firms exit their investments with big profits. The Financial Times also reports how “Low interest rates have also made pension funds, sovereign wealth funds and endowments wary of keeping cash on their books for too long.”
Both private equity firms have fared extremely well with their previous funds. The State of Hawaii Employees’ Retirement System reported last year, that the Warburg Pincus Private Equity XI has a net internal return of 18.5% as of the end of September. Furthermore, Bridgepoint made a massive gain earlier this year when it sold Infront Sports & Media AG to China’s Dalian Wanda Group. The sale was worth €1.05 billion, with the firm paying just €550 million (including debt) in 2011.