US-based investment firm the Blackstone Group is on the home straight with its latest fund, set to close at a record breaking $6.45 billion. The Blackstone Capital Partners IV fund, expected to close formally before the end of July, will exceed its initial target by almost $1.5 billion.
Blackstone’s last fund raised $4 billion in 1997. Its European investments include a GBP448 million commitment, with Candover, to establish a new London-based insurance company, Wellington Re. This fund still has a couple more investments to make before it is fully committed, then Blackstone can begin investing its fourth fund. The global fund will typically invest amounts between $100 million and $400 million, but has the potential to invest more if appropriate.
Stephen Schwarzman, president and CEO of the Blackstone Group, said: “The prospects for investing the fund are particularly opportune given the global dislocation of stock markets and the need for corporations to raise capital by selling assets. The new deal pipeline is beginning to flow again, and at significantly more realistic valuations compared to the last several years.”
Blackstone’s latest fund was launched in March 2001 and held a fourth closing of $5.1 billion in February this year. It was raised with the assistance of UBS Warburg, outside the US, and Credit Suisse First Boston in the States. The Blackstone Group now manages private equity funds of over $14 billion, as well as other alternative assets (real estate, corporate debt and marketable alternative asset management) worth $11 billion.
Investors representing 90 per cent of the capital raised for Blackstone’s last fund have reinvested in the new fund and half of the investors in fund IV are investing with Blackstone for the first time. Of the total raised for the new fund 27 per cent was raised outside of the US, mainly from European investors.
Other mega-funds that have already closed this year include Warburg Pincus Private Equity VIII at $5.3 billion and Credit Suisse First Boston’s DLJ Merchant Banking Partners III at $5.4 billion. Thomas H. Lee Partners’ $6.1 billion Fund V set the previous record for a private equity fund in 2001.