PE fund briefs, week of Sept. 8, 2008

Water Street closes fund II at $650M cap

Water Street Healthcare Partners has closed its second fund at its hard cap of $650 million. The Chicago-based firm, which focuses on the health care industry, targeted Water Street Healthcare Partners II at $600 million. The firm raised $370 million for its first fund, which closed two years ago.

Returning investors in the second fund include Adams Street Partners, Allianz Private Equity Partners, Goldman Sachs Asset Management and New York Life Capital Partners. New investors included Soros Strategic Partners, Blue Cross Blue Shield of Arizona, Danske Private Equity and a number of university endowments and foundations.

The first investment for fund II is the acquisition of a controlling stake in CareCentrix, a provider of home health care services. The firm co-invested with Gentiva Health Services Inc., which was the parent company of CareCentrix. —Michael Baron

Circle Peak partner launches new firm

John Poerink

has left Circle Peak Capital to launch a private equity firm with James Hedges of LJH Global Investments, a Florida-based hedge fund. LJH has dabbled in buyouts, but the new effort, called Linley Capital, was formally launched last week.

Poerink was one of two partners at Circle Peak, where he led the firm in more than $400 million in investments, mostly in the consumer products industry.

Similar to Circle Peak, Linley Capital will be fundless, securing investments from high net worth individuals and families. Unlike Circle Peak, Linley will have the flexibility to invest across sectors and continents. And it has the backing of LJH, allowing it to invest up to $800 million on deals. That is an upgrade from Circle Peak’s $500 million cap.

“To myopically focus on one sector or geography would disadvantage ourselves,” Poerink said.

Poerink said that he will continue working with Circle Peak portfolio companies. He still sits on the boards of Rocket Dog Holdings, a shoe company, and Luxury Optical Holdings, a retail eyewear chain, which Circle Peak owns.

Poerink said he plans to tap a growing pool of operational advisors for opportunities in various sectors, such as steel manufacturing and beverages. —Erin Griffith

Platinum Equity raises $2.75B

Platinum Equity last week announced that it has closed its second fund with $2.75 billion in capital commitments. The final close comes about five months later than the Beverly Hills, Calif.-based firm had intended to wrap things up.

“Fund-raising was basically done for all intents and purposes by the end of Q1,” says Principal Mark Barnhill. “It just took a bit longer to get to the official finish line with a couple of LPs, so we waited.”

Platinum began pre-marketing the fund in late 2006 with a $1.5 billion target, which was twice the size of its first institutional fund raised in 2004. The firm, which started in 1995, previously invested funds raised solely from the personal fortunes of founder Tom Gores.

Barnhill says that current market conditions prompted the firm to expand the fund to $2.75 billion, rather than contract it.

“We focus on operationally underperforming and under-managed businesses in need of operational capabilities on the ground to facilitate turnaround,” Barnhill says. “From that perspective, it’s a more target-rich environment than it was when we began fund-raising… We’re willing to take on substantial operational risk, but like to minimize financial risk.”

Platinum’s second fund is about 30% deployed in five portfolio companies, including Covad Communications Group, 3B The Fiberglass Co., Tecumsah Power Co., Wheel Pros Inc. and Ryerson Inc. —Dan Primack

American Industrial forms $405M fund

American Industrial Partners, a middle-market buyout shop that targets industrial businesses, held the final closing of American Industrial Partners Capital Fund IV in mid-August at $405 million, slightly exceeding its $400 million target.

The New York-based firm raised just under $240 million for its third fund, which closed in 1999.

For fund IV, about 60% of the capital commitments made by the fund’s 24 LPs came from new backers, says Partner Kim Marvin.

New LPs include FLAG Capital Management, Goldman Sachs, Grove Street Advisors, Investure, John Hancock Life Insurance Co. and Parish Capital. Returning LPs include HSBC and Partners Group. Endowments were also well represented, Marvin says.

Since April 2007, the firm has invested $50 million combined on three acquisitions from the new fund with a fourth acquisition expected to close in a few weeks. The firm intends to invest in 10 to 12 deals at a rate of three per year, focusing on corporate carve-outs of U.S. industrial companies. —Nancy Gordon

CLSA launches water fund

CLSA Capital Partners has launched a new fund that will invest in water and waste management opportunities in Asia. It is initially capitalized with $35 million from an undisclosed London-based firm.

Hong Kong-based CLSA, a unit of French lender Credit Agricole, joins a growing number of firms pursuing water as an investment theme, such as Swiss bank Pictet, which launched its Water Fund PICTET26 in 2000.

A Pictet fund manager last year estimated the United States needs to invest $1 trillion in water infrastructure over the next two decades and said annual spending of up to $80 billion is needed globally. —Reuters

Guggenheim eyes energy fund

Guggenheim Investment Management is raising up to $500 million for its first Energy Opportunities Fund, which will invest in debt and equity of U.S. energy companies, according to a regulatory filing.

The Chicago-based firm has already secured about $150 million from limited partners, including Midland National Life Insurance.

Prudential pulls in $200M for first close

Prudential Capital Group has raised about $200 million for its third mid-market mezzanine fund, which is targeted at $900 million, according to a regulatory filing. The Chicago-based firm raised $775 million for its second fund, which closed in March 2005.