Ex-Highbridge PE team projects $6.5 bln close for third mezz fund

HPS Investment Partners raised around $5.6 billion toward an expected $6.5 billion for its third mezzanine investment fund, its first since completing a spinout from JP Morgan Chase & Co, according to limited-partner presentations obtained by Buyouts.

HPS, formerly Highbridge Principal Strategies, will likely close the fund on $6.5 billion during the fourth quarter, the presentations said. HPS Mezzanine Partners III has exceeded its $5.5 billion target. Roughly 70 percent of Fund III’s limited partners are existing investors.

Fund I, a $2.1 billion 2008 vintage fund, netted an 8.5 percent internal rate of return and 1.3x multiple as of March 31, according to a Hamilton Lane report for Teachers’ Retirement System of Louisiana. Fund II, which closed on more than $5 billion in 2013, netted a 16 percent IRR and 1.3x multiple as of the same date.

Teachers’ Retirement System of Louisiana committed as much as $75 million to the fund at its Oct. 6 meeting, pension spokeswoman Lisa Honore said. The commitment is subject to final negotiations.

HPS did not respond to a request for comment.

HPS Investment Partners is composed of the PE team from Highbridge Capital Management, an alternative-asset investment firm that JP Morgan Chase acquired in 2004. In March, JP Morgan Chase sold most of its stake in HPS Investment Partners to the firm’s management team, led by CEO Scott Kapnick.

JP Morgan Chase retained its hedge-fund assets under the Highbridge Capital Management banner, as well as a minority non-control stake in HPS, according to a copy of an investment presentation obtained by Buyouts.

HPS manages $20.7 billion of assets across a variety of private debt and credit-related strategies, including direct lending, mezzanine and real estate funds. The firm also has a $10.7 billion platform of public credit assets made up of liquid credit, leveraged loans and consolidated loan obligations.

In addition to Kapnick, the firm’s investment committee includes Scot French, Michael Patterson, Purnima Puri and Faith Rosenfeld. HPS Investment Partners maintains offices in Chicago, Dallas, Hong Kong, Houston, London, Los Angeles, Luxembourg, Miami, New York and Sydney.

Action Item: For more information about HPS, visit www.hpspartners.com

People walk by the JP Morgan & Chase Co. building in New York on October 24, 2013. Photo courtesy Reuters/Eric Thayer