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TH Lee caps Fund IX at $4.9bn amid fundraising bonanza

The fund is targeting $4.25bn for investments in technology, healthcare and financial services companies.

The robust fundraising environment that has so far defined 2021 has many firms bullish on their chances of attracting investors to their latest offering, but many GPs are being careful to keep fund sizes at reasonable levels.

Thomas H. Lee Partners is experiencing strong demand for its ninth fund, sources say, but will still cap commitments at $4.9 billion.

Documents from Teachers’ Retirement System of Louisiana prepared by consultant Hamilton Lane for January set the target for Thomas H. Lee Equity Fund IX at $4.25 billion, which was first reported by the Wall Street Journal. 

Massachusetts Pension Reserves Investment Management Board invested in seven previous TH Lee funds and is re-upping for the ninth pool. Materials for its board meeting Wednesday said the fund’s hard-cap was $4.9 billion, providing some room should more LPs want to get on board.

Demand is still higher, though, showing the firm’s offering is not exempt from the fundraising bonanza as LPs look to cash in on what many think will be a profitable environment following the coronavirus pandemic.

TH Lee’s recent funds have performed well, according to the Hamilton Lane presentation. As of September 30, 2020, Fund VIII, a 2018 vintage, had a net internal rate of return of 77 percent and a 1.4x total value to paid-in multiple. Fund VII, a 2015 vintage, had a 24.2 percent net IRR and 1.7x multiple.

TH Lee focuses on investments in the healthcare, technology and business services, financial services and consumer sectors. Technology/business services and healthcare, two sectors that have benefitted most from the coronavirus pandemic, made up most of the firm’s previous two funds.

The fund plans to make 12 to 18 investments of between $100 million and $300 million in companies with enterprise values of between $250 million and $2.5 billion.

The fund is on the market during a torrid fundraising cycle, which has seen multiple funds raise their targets after strong LP interest.

Earlier this week, Buyouts reported that Peak Rock Capital raised the offering on its latest vehicle from $1.3 billion to $1.8 billion, which sources said was due to strong LP interest. The fund has already raised more than $1.6 billion, according to a Form D.

Software-focused firm JMI Equity has done the same, Buyouts reported, raising the target on its tenth fund from $1.3 billion to $1.7 billion. Just like Peak Rock, JMI had quickly passed its target, raising just under $1.5 billion, according to a Form D filed earlier this month.

MassPRIM also is committing to the JMI vehicle, and Wednesday’s meeting materials said it is expected to close next month. JMI Equity declined to comment for this story.

Hellman & Friedman‘s latest fund, targeting $20 billion, saw strong interest almost immediately, sources told Buyouts. Brookfield Asset Management CEO Bruce Flatt recently told Buyouts the industry was in the early stages of a fundraising “super-cycle.”

Louisiana Teachers committed $100 million and MassPRIM $200 million to the TH Lee fund. MassPRIM’s board approved a commitment of up to $100 million to JMI’s fund.

Action Item: read more about TH Lee’s strategy here.