Education-focused Leeds Equity looks to hit $1.8bn target for newest flagship

Investors in past Leeds funds have booked strong cashflow returns.

Leeds Equity Partners is looking to raise $1.8 billion for its eighth flagship fund, according to public documents from Connecticut Retirement Plans and Trust Funds.

Leeds specializes in education, career training, information services and related software companies. The firm closed its last flagship fund in 2021 at $1.4 billion.

Connecticut is considering a $150 million commitment, along with a $25 million sidecar, to Fund VIII at its September 13 board meeting. Buyouts viewed documents about the eighth fund in advance of the meeting.

The documents combined commentary from Connecticut’s investment staff and consultant Hamilton Lane.

According to the documents, Leeds seeks $1.8 billion for the new fund, with a $2 billion hard cap. The firm expects to hold a first close for Fund VIII in Q4 2023 and plans to activate the fund in Q1 2024.

Fund VIII will charge a 2 percent management fee on commitments during a five-year investment period and a 2 percent management fee on invested capital, the documents said.

The new fund has a 20 percent carried interest rate and 8 percent preferred return on a deal-by-deal basis, according to the documents.

Leeds plans to make a 2 percent commitment to the fund, the documents said.

The fund has a term of 10 years, along with two one-year extensions that require advisory board approval, according to the documents.

According to the documents, Connecticut will have a seat on Fund VIII’s LPAC.

Fund VIII will target between 12 to 14 investments with a check size between $50 million to $200 million, according to the documents. Leeds will use the fund to make five education investments, five workforce training investments and four information investments.

The manager also looks to be the first provider of institutional capital in its investments, the documents said.

Hamilton Lane said Leeds expects to use continuation vehicles in Fund VIII but “does not anticipate relying on them for a path for exit but rather where it is beneficial.”

Connecticut is an investor in the manager’s past three flagship funds, with a $75 million commitment to Fund VII, past documents show.

To date, Leeds has shown strong results. The 2008 vintage Fund V has a 19 percent IRR 2.1x DPI while the 2016 Fund VI has a 24 percent IRR with cashflow that has broken even, according to the documents.

Past documents indicate Connecticut had not previously conducted a co-investment with Leeds.

The documents said Leeds holds 15 unrealized investments in Funds VI and VII, which is still in its investment period. The fund expects several exits from Fund VI over the next 18 to 24 months and is exploring two early exits from Fund VII portfolio companies.

The firm was formed in 1993 by Robert Bernstein and Jeffrey Leeds, who still works as a managing partner. The duo worked at Lazard Freres before starting Leeds, Hamilton Lane said. Bernstein moved to a senior adviser role in 2018.

Other managing partners include Jacques Galante and Scott Van Hoy. Galante joined Leeds in 2009 after previously working for The Carlyle Group. Van Hoy joined in 2010, moving on from DLJ Merchant Banking Partners.

In 2020, managing partner Susan Cates and partner Elizabeth Chou launched the growth equity-focused Leeds Illuminate Advisors.

Leeds did not return a request seeking comment.