Many large allocators have eyed mid-market funds, believing opportunities lie in that corner of the market. This is New Mexico’s first commitment to a Kinderhook fund, reflecting its interest in this end of the market.
New Mexico made the commitment at its January 23 board meeting. Buyouts watched a broadcast of the meeting.
“They’re a middle manager that’s been on our wish list for years. These are the types of strategies we want in the core of our portfolio,” said Chris Cassidy, New Mexico’s director of private equity.
The target size and other information about Kinderhook Capital Fund 8 was not made available. According to its presentation, Fund VIII will have a European waterfall.
Its seventh fund closed in 2022 at $1.85 billion, noted a release from the company.
Kinderhook focuses on controlled buyouts across the healthcare services, environmental, industrial, light manufacturing and automotive industries.
Richard Pugmire, a partner with New Mexico’s consultant Mercer Investments, said that more than 70 percent of the manager’s exits have come through strategic acquisitions.
Kinderhook’s fund offers better terms than similar funds currently in the market, Pugmire said. These terms were not disclosed.
Kinderhook managing director Chris Michalik said at the meeting he anticipates the manager and its operating partners will be one of the top four or five investors in Fund VIII.
Kinderhook and its operating partners were among the three biggest investors in its previous funds, Michalik said.
According to its presentation, Kinderhook and its operating partners have committed more than $500 million across its seven earlier funds.
The GP commitment to Fund VII was $143 million, or 7.7 percent of its final close, according to the presentation. Operating managers committed another $72 million to the fund.
According to Buyouts’ database, New York State Teachers’ Retirement System committed $250 million to Fund VII, making it the largest known LP in Fund VII.
Kinderhook buys about 70 percent of its companies from families that want to “roll their capital” next to the manager, Michalik noted.
“These are the types of strategies we’re interested in when we build out our co-investment portfolio,” Cassidy said.
Kinderhook did not respond to questions asking to comment on this story.