H.I.G. Capital raised $6 billion for its latest middle-market leveraged buyout fund, a figure that includes $450 million of co-investment capital.
(Bloomberg) — H.I.G. Capital raised $6 billion for its latest middle-market leveraged buyout fund, a figure that includes $450 million of co-investment capital.
The firm initially targeted $5 billion for the vehicle, which was offered to new investors for the first time since the strategy was conceived for a 2008 fund.
“It has been a challenging fundraising environment, particularly due to limited partners that have been impacted by the denominator effect,” Executive Managing Director Jordan Peer Griffin said in an emailed statement, referencing the fact that some institutional investors have been forced to trim their exposure to asset classes such as private equity following a sharp decline in public markets.
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“We were able to overcome these dynamics given the strong performance and differentiated approach of our strategy,” Peer Griffin said. “Additionally, we benefited by having a strong presence in the LP community, across the globe, including in less impacted regions such as the Middle East and Asia.”
Miami-based H.I.G. has said it specializes in deals that include recapitalizations, management buyouts and complex corporate carve-outs featuring businesses that aren’t necessarily profitable.
The latest vehicle — H.I.G. Middle Market LBO Fund IV LP — is a successor to a $3.1 billion fund, on which the firm closed in late 2019, and has so far backed companies including audiobook publisher RBmedia and materials distributor Formerra.
Investors in the new fund include the New York State Common Retirement Fund, Texas County & District Retirement System, Missouri State Employees’ Retirement System and Cathay Life Insurance. Many investors were buoyed by the returns of earlier funds.
The second vintage, for instance, delivered a 28.44% net internal rate of return, or 2.2 multiple on invested capital through the end of February, according to data compiled by Bloomberg. That was bolstered by sales of portfolio companies including Quicken and Empire Today, from which the firm earned a return of more than five times, people with knowledge of the matter said.
H.I.G.’s third middle-market buyout fund, which has yet to sell the bulk of its holdings, was marked at a 18.5% net IRR and a 1.3 MOIC as of March 31.
The firm, which counts Blue Owl Capital Inc.’s Dyal Capital as a minority investor, oversees about $58 billion in equity commitments. Its middle-market strategy has about 65 dedicated investment professionals who work closely with roughly 30 operating partners and other staffers to generate deal flow.
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