Established private equity firms continue to garner the majority of LP fund investments versus their younger brethren. In the last month, established firms Morgenthaler, Berkshire Partners and Warburg Pincus have announced either fund closings or first round closings of funds.
Additionally, Baring Private Equity Partners is currently shopping its second Asian investment vehicle to limited partners, and last week announced a $206 million initial close. Targeted at $400 million, the fund is expected to hold a final close by year-end.
Morgenthaler, the 33-year-old Cleveland, Ohio-based private equity firm, has just closed its seventh fund, Morgenthaler Partners VII, with a total capital commitment of $850.
Despite a contracting buyout industry — the fund targeted $700 million and therefore came in oversubscribed — the firm only began fund raising in the spring of this year, its $570 million sixth fund that it closed in early 2000 is fully invested and Morgenthaler has added new deal-making professionals to expand its investments.
The new vehicle focuses on industrial growth and manufacturing, communications, and health care, and 75% of the new fund came from existing LPs.
“Limited partners have told us they are more apt to invest in names they trust with a record of solid returns and consistency through up and down cycles,” added general partner Bob Pavey, in a release.
Both Berkshire Partners and Warburg Pincus landed first closes, Berkshire for its sixth fund, Warburg Pincus for number eight. In the case of Boston-based Berkshire, the fund’s target capitalization is $1.25 billion and its first close was $870 million.
The firm said it expects to wrap up fund raising by October. The firm said several international institutions hopped on the LP bandwagon for the first time. Warburg’s target is $5 billion, of which it raised $2.8 million for its first close.
Though fund-raising conditions are proving more favorable to time-honored firms, there continue to be exceptions despite the mostly lackluster fund-raising environment.
Case in point: Rye, New York-based Greenbriar Equity Group LLC, which just wrapped its debut vehicle at $700 million, taking in $100 million more than the firm targeted. Greenbriar Equity Fund LP, which was launched in July 2000, will focus on the transportation sector.
Joel Beckman, one of the fund’s founders, said when he and the co-founders came to market, people were still focused on technology and telecom.
“The markets have proven that just about everything has issues of risk and [are cyclical],” he said, noting that they saw an opportunity to focus on a sometimes-ignored fund by the generalist firms.
Other established funds, however, are having difficulty raising money in the current climate. Perhaps the most prominent example of this trend is Dallas-based Hicks, Muse, Tate & Furst, which recently scaled back its original $1 billion target for Latin America Fund II to $200 million.