The newly named J.P. Morgan Chase & Co. can’t seem to stay out of the news lately.
The investment bank is now reportedly planning to raise a $13 billion private equity fund that, if successful, would be the largest ever private equity fund ever.
However, not all the work will fall on the shoulders of the group’s private equity division, now known as J.P. Morgan Partners even though Chase’s private equity brand name has always been stronger than Morgan’s. J.P. Morgan Partners will be in charge of rounding up $5 billion of capital from outside investors, while the other $8 billion would come from the bank itself.
As for the $5 billion portion, reports have been circulating since early fall that Chase Manhattan Corp. had set out to raise a fund with this target (Buyouts Sept. 25, 2000, p. 4).
Here’s the kicker – if the bank does in fact add $8 billion to the fund, the contribution will be the biggest sum ever contributed to a single private equity fund by an individual organization.
So, even though $13 billion sounds like an astronomical amount to target for a private equity fund, raising $5 billion from outside investors has become almost common over the past couple of years. Thomas H. Lee Co. just closed its sixth fund on $6.1 billion – currently the largest fund out there. Funds raised by Kohlberg, Kravis, Roberts & Co., Goldman Sachs & Co. and Tom Lee’s fifth fund all surpassed the $5 billion mark.
Sources say that the fund-raising market in 2001 has yet to be characterized. The year 2000 was known for being capital scarce since so many mega funds came into the market and LPs hit their allocation limits.
“We’re going to see LPs being choosy this year,” said one GP, who’s not in the fund raising market right now. “Their assets have seen ups and downs with the stock market and they don’t have as much to throw around as a result. They’re going to be very careful about where they put their money and it will be interesting to see which relationships they keep and which ones fall by the wayside.”