Hellman & Friedman holds final close on flagship on more than $22bn

Hellman & Friedman quietly held a final close on its 11th flagship fund at year-end, not quite hitting its $24 billion target but with a haul of about $22.3 billion, sources told Buyouts.

The firm also closed a large secondary deal that raised about $2.1 billion, which the firm combines to consider a total fundraising of more than $24.4 billion, sources said.

The firm was among a handful of larger managers raising billions in the challenging fundraising market that left many GPs to consider whether to close funds under target or keep them open to try and hit their numbers.

Other such managers include Carlyle Group, which last August closed its eighth fund on $14.8 billion, below its initial $22 billion target. Apollo Global Management closed its 10th flagship pool on $20 billion, under its $25 billion target, TPG closed its ninth flagship pool on $12 billion, under its $15 billion target, while Blackstone Group made public indications its newest flagship would be smaller than its predecessor.

Hellman has been one of the select few firms to enjoy LP largesse based on its past performance, and its generally LP-aligned fund structures, sources have told Buyouts in the past. The firm’s performance hovered around an aggregate 22 percent net internal rate of return since inception as of June 30, 2022, according to an investment presentation for Fund XI.

Recent fund performance

• Fund X (2021 vintage): IRR: N/A; TVPI: 1.06x
• Fund IX (2018 vintage): IRR: 15%; TVPI: 1.40x
• Fund VIII (vintage 2014): IRR: 13.9%; 1.78x
• Fund VII (vintage 2009): IRR: 24.6%; TVPI: 3.37x

Source: Buyouts data as of June 30, 2023, citing various public pension systems. Subscribers can view here.

LPs also are focused on capital flowing back to them from their past PE funds. Hellman returned about $8.5 billion last year to LPs, including through partial exits of Hub International and TeamSystem.

Hellman has not yet activated Fund XI, with Fund X, which closed on $24.4 billion in 2021, around 80 percent deployed. The pool won’t start charging management fees until it’s officially activated, which happens with the first investment.

The GP is kicking in around $1.5 billion as a commitment to the pool, a source said. Terms are the same as in past Hellman funds, including a structure that does not include a preferred return, the source said.

Hellman’s secondary, meanwhile, allowed LPs who rolled in past continuation funds to receive liquidity. Lead investors in Hellman’s deal were Ardian, HarbourVest Partners and Hamilton Lane, Buyouts previously reported.

The businesses in the deal were Verisure; UKG; Applied Systems; and Hub International. Pricing differed for each asset but averaged around 94 cents on the dollar across the four companies.

The deal was unusual in that it was seeking, on three of the assets, to provide liquidity to LPs who rolled into earlier continuation fund deals. The firm moved UKG (then known as Kronos) into a continuation fund in 2018 in a deal that included Blackstone Group and capital from a newer Hellman & Friedman fund, Buyouts reported at the time. Verisure and Applied Systems were the subject of a continuation fund deal in 2020, Buyouts reported.

Rationale for the transaction is to allow LPs who have built up large positions with Hellman & Friedman to sell down some of that net asset value, the sources said.

Fundraising remains tough, though sources believe LPs are opening up more as their portfolios come back into balance with the strengthening of the public markets.

North American buyout, growth, secondaries, venture capital and other funds collected a total of $559 billion last year, down 9 percent from 2022, according to Buyouts data. The number of fund closings dropped even more intensively, hitting a five-year low with some 1,208 pools reaching the finish line last year, down 17 percent from the prior year.