PE fund briefs, week of Dec. 7, 2009

River Associates launches its sixth fund

River Associates Investments, a small-market buyout shop based in Chattanooga, Tenn., has kicked off fund-raising for its sixth vehicle, River VI.

The new fund, with a target of between $150 million and $200 million, will be used to buy companies generating EBITDA of $2 million to $10 million in the United States and Canada. The firm raised $111 million for its fifth fund, which closed in 2006.

River Associates, which funds its deals with between 40% and 45% equity, acquires companies in the manufacturing, distribution, industrial services and retail sectors, among others. The firm avoids investments in heavily regulated industries, and also shuns startup technology, commodity and natural resources companies. River Associates will partner with other funded and fundless private equity groups in certain situations. It also considers add-on acquisitions of any size.

The firm partners with management teams in buyout, recapitalization, family succession and corporate divestiture deals. River Associates has a small group of what it calls “patient capital” limited partners; it can thus be a longer-term partner than many other equity sponsors, according to the firm. George Pettway, an advisory partner, founded the firm in 1990. —Nancy Gordon

Carlyle to share fee income

Carlyle Group has agreed to share 80% of fee income on its fifth fund with investors, as reported last week by Bloomberg and The Wall Street Journal.

The Washington, D.C.-based firm also will limit debt investments by the $13.7 billion fund, its largest for U.S. leveraged buyouts, which was raised in 2007. The changes took effect last month.

The split is an increase from its current 65% split. Carlyle reportedly charges fund V investors a 1.5% management fee on assets and takes 20% of the profit on investments, according to sources familiar with the situation. The buyout firm also assesses fees on portfolio companies for transaction, financing and monitoring services. That money is split with fund investors.

Bloomberg reported that the California Public Employees’ Retirement System and other limited partners in the fund are pressing for a bigger slice of profit as the value of private equity holdings fell 30% in the year ended March 31. Distributions to clients fell by two-thirds to $63 billion in 2008 from the previous year, according to London-based researcher Preqin Ltd.

AI Capital to launch Asian FoF

Alternative Investment Capital Ltd., a Tokyo-based investment firm majority owned by Mitsubishi Corp., plans to raise a third private equity fund of funds next year, as first reported last week by Bloomberg.

The firm has committed $634 million to buyout firms since 2002. AI Capital’s latest fund has invested in funds managed by The Carlyle Group and Advantage Partners.

AI Capital President and CEO Kazushige Kobayashi says that the new fund plans to invest in 15 to 20 funds over the course of three years, and targets an internal rate of return of more than 20 percent.

Alpine holds third close

Alpine Investors has held a third close on its fourth fund, raising $85.6 million, according to a regulatory filing.

The San Francisco-based firm entered the market in September 2008 with its fourth fund, seeking to raise $175 million target with a $205 million hard cap, a slight jump the firm’s third fund. Alpine Investors III closed in March 2007 with $125 million in commitments.