ACON Closes Fund III At $751M, Sets New Latin Fund

Firm: ACON Investments

Fund: ACON Equity Partners III LP

Amount Raised: $751 million

Original Target: $600 million

Placement Agent: Mercury Capital Advisors

A person familiar with the firm said the firm now expects to begin raising its new pan-Latin American fund in the next couple of months. That fund, expected to be called ACON Latin America Opportunity Fund IV, likely will have a target around $500 million, according to the source. The fund’s predecessor was raised in 2011.

So far, Fund III has made three investments, accounting for roughly 15 percent of the its assets, according to Bernard Aronson, one of the firm’s co-founders and managing partners. Aronson said he “expects the fund to have between eight and 12 investments that range between $30 million and $100 million each.”

One of ACON’s most prominent investors is David Bonderman, the founder of TPG Capital. ACON’s investments span a variety of industries, including retail, healthcare services and consumer finance, but the firm has a special focus on companies in the energy and energy services sector.

The strategy for Fund III is to look at “businesses that have a growth driver affected by America’s changing demography,” said Aronson, noting that the U.S. Hispanic population is the largest minority population in the United States. “At end of the day, we’re deep value investors who try to find businesses at inflection points. And we try to achieve returns though operational improvements, by growing EBITDA and not relying on leverage or financial engineering.”

Fund III attracted a slew of top investors including the New York State Common Retirement Fund, which committed $120 million, the California State Teachers’ Retirement System, which committed $70 million, the Massachusetts Pension Reserves Investment Management Board, which pledged $50 million, the New York City Retirement Systems, which pledged $21 million, and the Los Angeles Fire and Police Pension System, which committed $10 million.

The fund’s predecessor has performed well. According to September 2012 data from CalSTRS, the 2006-vintage ACON-Bastion Partners II LP has delivered a net IRR of 20 percent. CalSTRS, which committed $40 million to that fund, does not report return multiples. That fund, including a sidecar vehicle, raised $565 million overall.

As for the anticipated new Latin American fund, it is expected to concentrate on investments in Mexico, Columbia, Brazil and Peru. The firm has been investing in Latin America since 1998.

Aronson said that Latin America generally has benefited from a reduction in public and private debt, which has helped the region cope with the financial crisis five years ago much better than the economies of the United States and Europe. Also, he said, per-capita income in the region is outstripping population growth, laying the groundwork for a growing middle class.

Based in Washington, D.C., the firm also has offices in Los Angeles, Mexico City and Sao Paulo. Besides Aronson, the firm’s other managing partners include Ken Brotman, Jonathan Ginns, Guillermo Bron and Daniel Jinich.