Bain Capital nears $5 bln for 11th flagship fund: UPDATE

Bain Capital has drawn commitments of about $4 billion from limited partners, and plans to invest about $800 million of its own capital for about $4.8 billion for the core buyout fund thus far. Bain Capital has typically invested at least 10 percent of its own money in its past funds.

The Boston-based buyout firm, co-founded by 2012 GOP presidential candidate Mitt Romney, expects to reach its target of $6 billion by the end of the year.

One limited partner told peHUB that Bain Capital’s plan to commit a big chunk of the fund — about 13.5 percent of the total if it hits its $6 billion target — marks “one of the biggest GP commitments I’ve seen from a large buyout firm.”

“That’s a really big statement,” another LP said. “They’re putting their money where their mouth is.”

Bain’s GP commitment was increased by $200 million from $600 million, sources said. The firm has had a cycle of strong exit activity, generating about $9 billion in realized proceeds in the trailing 12 months that ended in September, one source said. The firm decided to pump some of the proceeds from that exit activity into the new fund, the source said.

Both of the limited partners said they are taking a second look at possibly committing to Bain Capital Fund XI.

Bain Capital disclosed that it had raised $2.3 billion for Fund XI in a Form D filing in April.

The Pennsylvania State Employees’ Retirement System, a limited partner for Bain, has disclosed that the firm projects a minimum IRR of 20 percent. The pension system has reported that Bain Capital Fund XI plans to make mostly North American investments in the $200 million to $500 million range, with the flexibility to move up to $1 billion in bigger deals.

Bain’s most recent buyout fund, Fund X, dates back to 2008 and raised $10.7 billion. The fund had a break-even IRR as of Sept. 30, 2012, according to data from the Regents of the University of California. The vintage 2006 Bain Capital Fund IX raised $8 billion and logged an IRR of 6 percent as of the same date. Bain Capital’s vintage 2004 Fund VIII has an IRR of 11.4 percent.

With about $70 billion of assets under management, Bain ranks as one of the largest private equity firms in the world, with investments including retailer Toys ‘R Us, Bright Horizons Family Solutions and The Weather Channel.

Sister news service Reuters reported in May that Bain offered investors three options on fees for Fund XI.

Instead of the traditional 2 percent fee to manage the assets and 20 percent of investment profits, Bain offered investors options including a 1.5/20 fee structure with a 7 percent preferred return rate, Reuters reported.

Meanwhile, The Carlyle Group is kicking in around $900 million to its sixth fund, which has been targeting $10 billion. Dow Jones reported in September the firm set its hard-cap at $12.5 billion.

(Updates to add comments from two LPs)

Chris Witkowsky, editor of peHub, contributed to this report.