Longhorn Growth Fund Skewers $450M Close –

TGF Management Group, based in Austin, Texas, has managed to wrap its third private equity fund, said TGF Partner James Kozlowski.

TGF in late December held a first and final close on $450 million Texas Growth Fund II 1998 Trust, which will make buyout, platform and growth capital investments throughout its home state. The fund is the successor to the firm’s first two funds, Texas Growth Fund I 1991 Trust and Texas Growth Fund II 1995 Trust, which raised $52 million and $75 million, respectively. The fund was launched last spring with a $450 million target.

Mr. Kozlowski said limited partners that signed on for the closing were exclusively Texas-based institutions, comprised mainly of public pensions and endowments. He declined to name specific investors.

The fund’s terms include a carried interest split that is a “slight discount” on the standard 80%/20% split, according to Mr. Kozlowski, and feature a management fee of slightly more than 1.5%. The fund also includes a hurdle rate that Mr. Kozlowski did not disclose.

The fund will invest in Texas-based companies with revenue between $15 million and $200 million and will look to put between $5 million and $15 million in equity into each deal. The 1998 Trust will avoid such traditional Texas industries as oil and gas exploration and instead will focus on the manufacturing, services, distribution and telecommunications sectors.

Although all initial investments must be made in-state, Mr. Kozlowski said the firm may make out-of-state add-ons to platform companies should there be a lack of opportunities in Texas.

In addition to Mr. Kozlowski, TGF’s other partners are Stephen Soileau and Brent Humphries.