Arcline, growing at rapid pace, hits market with third fund

Even though the private equity fundraising market is as tough as many veteran fundraisers have seen since the great financial crisis, that hasn’t daunted certain managers from bringing new funds to market.

One of those is Arcline Investment Management, a firm that has had nothing short of meteoric growth since its formation in 2018. The industrials-focused firm, led by former Golden Gate executive Rajeev Amara, is in the market with its third fund, targeting $4 billion, sources told Buyouts.

Arcline is one of the few newish managers that is tackling the challenging fundraising market and is looking for commitments from limited partners. LPs are generally sticking with their existing managers and eschewing forming new relationships, to the detriment of emerging firms.

But Arcline has some advantages, and is expecting at least two interim closes this year, with a potential final close in Q1, according to an LP who has heard the fund pitch. An Arcline spokesperson declined to comment.

The firm’s performance has been strong. Fund I, which closed on $1.5 billion in 2019, was generating a multiple of roughly 2x and a 56 percent net internal rate of return as of June 30, according to the LP. The first fund is about 30 percent realized, a person familiar with Arcline said.

Fund II, which closed on $2.75 billion in 2021, was producing a 1.15x multiple and a 25 percent net IRR as of the same date. Still early in its J-curve period, Fund II is largely unrealized, the LP said.

The other selling point for Arcline is its focus on industrials, the LP said. “People are looking for something different from software and growth,” the LP said.

One potential sticking point with LPs is the firm’s quick return to the fundraising market, having only closed its second fund last year. LPs are increasingly pushing back on the pace of GP fundraising, especially for the most popular funds.

Pace of fundraising is “conversation one, two and three” we’re having with GPs raising new funds, the LP told Buyouts. “Pacing has been very poor by the industry,” the LP said.

Arcline managed about $6 billion as of March, according to Arcline’s Form ADV. It focuses investments on the industrials and industrial technology sectors, targeting businesses with total enterprise values and revenues of up to $1 billion, the firm’s Form ADV said. Industrials can include aerospace and defense, life sciences, medical technology and personal care, the ADV said.

Amara formed Arcline after working at Golden Gate since 2000, focusing on the industrials investment practice. He formed Arcline with Shyam Ravindran, according to Arcline’s Form ADV. Ravindran, Arcline’s president, worked at Golden Gate from 2008 to September 2018, his LinkedIn profile said.

Over the summer, Arcline formed Signia Aerospace, which provides high-performance systems and specialized components for the aerospace industry.