Clayton Dubilier & Rice raised about $6 billion for its next flagship fund that is expected to ultimately total $13 billion, even amid the fundraising slowdown in the pandemic, sources told Buyouts.
The fundraising haul so far is another example of a brand name firm continuing to attract capital even as private market fundraising generally slows in the downturn. Silver Lake is another firm that is raising big numbers, Buyouts reported earlier this week.
CD&R held an interim close on Fund XI earlier this month, according to a limited partner with knowledge of the firm. The pool is expected to reach about $10 billion by early May, according to a person familiar with the Fund XI documents.
Fund XI is expected to ultimately raise $13 billion, the person said.
It’s not exactly clear when CD&R launched Fund XI into the market. The firm had been talking to LPs about the fund in January, Buyouts reported at the time.
CD&R closed Fund X on $10 billion in 2017, its largest-ever fund. Fund XI has been expected to eclipse the prior pool, though the fundraising environment turned extraordinarily challenging.
Because governments have confined populations to their homes and temporarily closed businesses, this has impacted fundraising in a few ways, including logistically in that GPs are no longer able to take their fund pitches on the road, nor are LPs able to perform on-site assessments of firms they are thinking of backing.
As well, LPs are concerned about becoming overexposed to private markets investments as their public holdings face steep declines.
Still, top-name firms with established records of performance will likely continue to attract capital from their long-time relationships and even score pledges from new investors.
CD&R falls in this category, sources said. “They are one of the names that has a better shot than others,” said an LP who is backing Fund XI. The impact a firm like CD&R could experience would be a longer fundraising period than initially anticipated, sources said.
“I think a lot of [LPs] are saying, ‘I want to be in your fund, I need more time,’” to make commitment decisions. This is in part because LPs are having to spend time scouring their existing portfolios for areas of weakness and closely tracking cash flows to make sure they can meet capital obligations.
CD&R is owned directly and indirectly by senior professionals of the firm, along with co-founder Joseph Rice and chairman Donald Gogel. Firm profits are distributed broadly among senior professionals based on specified sharing percentages, according to the firm’s Form ADV. CD&R was formed in 1978.
Fundraising for Fund X was boosted by strong performance in the ninth pool. Fund IX has generated a 19.47 percent internal rate of return since inception as of March 31, 2019, according to performance information from California State Teachers’ Retirement System.
CD&R Fund VIII, which raised $5 billion in 2009, generated a 25.96 percent IRR since inception as of Sept. 30, 2018, according to New Mexico Educational Retirement Board.
Update: This story was updated with additional information about the Fund XI tally so far, and its target.
Action Item: Check out CD&R’s Form ADV here: https://bit.ly/3eutb9J