LPs

Blackstone circles $475 mln for Fund VII from three LPs

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  • Los Angeles County, San Francisco, Louisiana Teachers’ back Fund VII
  • Blackstone targeting $15 bln with a $17 bln hard cap
  • Firm plans $10 bln first close for April

The Los Angeles County Employees Retirement Association led the charge, allocating up to $200 million to the fund, CIO David Kushner said in an email. Teachers’ Retirement System of Louisiana committed up to $125 million to the fund and San Francisco Employees’ Retirement System committed up to $50 million, said retirement system sources.

All three pensions are investors in previous Blackstone funds, according to retirement system records.

Blackstone set a $15 billion target with a $17 billion hard cap for Blackstone Capital Partners VII, with plans to hold a first close on approximately $10 billion in April, according several sources. As Buyouts previously reported, LPs that commit to the first close will not have to pay a management fee during the first six months of the vehicle’s investment period. 

Investors will pay a 1.5 percent management fee during the fund’s six year investment period. The management fee will then fall by 0.25 percentage points every two years until it hits a 0.75 percent floor. 

Fund VII’s investment strategy calls for large and middle market buyouts, as well as growth equity and buy-and-build investments. Blackstone will likely use the fund to make between 40 and 50 investments, typically in companies valued between $500 million and $1 billion, according to LP investment memos. The general partner will invest between $200 million and $750 million of equity per deal.

A Hamilton Lane report in Louisiana Teachers’ meeting materials indicates the firm considers the technology-enabled business services and energy sectors attractive areas of investment for Fund VII.

The GP expects to invest between 60 percent to 65 percent of the fund in U.S. companies and 20 percent to 25 percent in European businesses. The remainder of the fund will invest in India and China.

Blackstone closed its previous flagship fund on $16 billion in 2012. The Blackstone Capital Partners family of funds has netted a combined internal rate of return of 16 percent and a 1.6 multiple on invested capital to date, according to a fund presentation obtained by Buyouts.