Hellman & Friedman announced that it has closed its private equity fund and managed to raise $10.9 billion. The fund, HFCP VIII, was launched in June and thus the speed of fundraising is impressive and once again highlights the demand for high-yielding investments.
The private equity firm, which is based in San Francisco, managed to raise around $10.25 billion from outside investors. For the firm, the money raised marks the largest fund of its history. Its previous largest fund was closed in 2009 with around 25% fewer funds compared to its newest fundraising effort.
The firm is well known in the private equity industry for its focused strategy in going after the deals. The new fund is going to continue on this path and the aim is to target “large-scale equity investments of $300 million to $1 billion in growth companies with strong and defensible market positions primarily in the U.S. and Europe”, according to PR Newswire.
In a statement, Patrick Healy, the Deputy Chief Executive Officer of the firm, said, “Our focused and differentiated strategy allows us to fully concentrate our recourses on finding the highest quality companies and working with their outstanding management teams to accelerate growth”.
In addition, investors are lured in by Hellman & Friedman’s strong past performance. John Morris, from HarbourVest Partners, told the Financial Times the company has “consistently been one of our top performing managers through both up and down cycles”. The firm has reportedly not lost any money on investments since 1997.
String of Buyout Funds
The Hellman & Friedman deal is one of the newest examples in the string of buyout funds that the private equity sector has witnessed this year. There have been numerous funds exceeding $10 billion, with mainly investment from previous investors who are returning with the capital they received from the existing funds.
For example, we reported on the Apollo Global Management fund, which was the largest after the financial crisis in 2008. In addition, Warburg Pincus secured $11.2 billion and Carlyle was able to raise $18.4 billion earlier this year.
Favourable Market Conditions
The reasons behind strong fundraising performance by a number of private equity firms are to due to the favourable market conditions for these specific types of funds. The New York Times analysts argue that there are three reasons driving the fundraising.
First, public markets are not offering great returns and institutional investors want to invest in funds instead. Private equity firms like Hellman & Friedman are viewed positively due to the consistent performance, especially during these more difficult market times.
Second, as the markets soar and the environment for initial public offerings remains ‘hospitable’, private equity firms have been able to return plenty of capital back to investors. This is now being reinvested in these new funds.
Finally, investors are putting increasing amounts of money to private equity. This is because “investors set out to invest a fixed percentage of their assents in private equity” and thus “any growth or decline in their portfolios of publicly traded stocks forces them to recalibrate the balance”. Therefore, private equity funds might well be closing in on a record-breaking year.