Buyout Funds Look Overseas For Capital

Overallocation. The word alone is enough to make buyout professionals grunt and cringe at the thought of fund raising. As public pension funds watch their capital pools diminish, buyout firms increasingly are finding it harder to wrap up fund raising at, or above, target.

As a result, the market is seeing an increased amount of activity aimed at the European market.

“What we’ve been seeing over the last few years is investors increasingly realizing the economic opportunity in Europe because of the Euro, because of the consolidation of the economic community in Europe ? there are a lot of synergies there,” said Loren Boston, managing director and global head of the private equity fund group at Salomon Smith Barney.

One example of this trend is White Williams Private Equity Partners, a New York-based firm with offices in Vienna, Prague, Bucharest, Romania and Bratislava, Slovakia, which recently announced its preparation for a $250 million fund that will focus on Eastern European companies. Dave Williams, founder of the firm, said the idea is to invest in companies in future European Union countries that will experience major economic growth in the next few years. The fund, called the European Accession Fund LP, is currently shopping around for a placement agent that can attract investors both from the U.S. and Europe.

Also looking to Europe, The Blackstone Group this month held a first close its fourth fund, Blackstone Capital Partners IV, with a whopping $4 billion, which already brings the group to its rumored target. The fund, which is being placed by Credit Suisse First Boston, will continue along Blackstone’s generalist path, but is expected to put a greater emphasis on investments in Europe.

Asia Gets Some Play

Meanwhile, Asia is also gaining new attention. Newbridge Capital LLC this month closed Newbridge Asia III LP, a $724 million fund that will focus on buyout opportunities in Japan, South Korea, Taiwan and China, among other areas of Northeast Asia. This most recent fund follows Newbridge Asia II LP, which raised $392 million in 1998, with the same intent.

In September, Thomas Weisel Partners, a San Francisco-based merchant bank, partnered up with Japanese bank Nomura. The joint venture was formed mainly to facilitate cross-border M&A activity, but Thomas Weisel’s private equity group got the icing on the cake. As part of the agreement, Nomura invested $125 million into private equity initiatives sponsored by Thomas Weisel Partners, with a promise to raise up to an additional $500 million for future funds. Despite its Japan-derived capital, Thomas Weisel will continue to invest in U.S.-based companies for the time being.

Christa Fanelli can be contacted at: Christa.Fanelli@tfn.com

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