Warburg Pincus XII offers small LPs broad exposure to directs

Year founded: 1966

Investment strategy: Buyouts, venture capital, growth

Key executives: Co-CEOs Charles Kay and Joseph Landy, President Timothy Geithner

Office locations: New York, Amsterdam, Beijing, Frankfurt, Hong Kong, London, Luxembourg, Mumbai, Mauritius, San Francisco, São Paulo, Shanghai

AUM: $35 bln

Fundraising status: Raising Fund XII

Active portfolio companies: ~120

Website: www.warburgpincus.com

Warburg Pincus’ current fundraising comes on the heels of the $4 billion it collected last year through its debut energy fund. Assuming Fund XII holds its expected final close on target in the fourth quarter, Warburg Pincus will have closed on $16 billion of fresh capital in less than 18 months, surpassing the $15 billion the firm raised through its 2007 vintage vehicle, its largest to-date.

“Warburg Pincus’ experienced investment team, long history of investing in private equity, and deep network of relationships has allowed it to produce strong fund returns over the years,” Verus Investments wrote in a memo for Fresno County Employees’ Retirement Association. Verus said Fresno County should consider a commitment to Fund XII later this year.

Warburg Pincus declined to comment.

Broad approach

Smaller pensions like Fresno County are well served by Fund XII’s investment mandate, which gives LPs direct exposure to a wide range of investment strategies, sectors and geographies through a single vehicle, rather than several specialist funds. As with its previous flagships, Warburg Pincus XII will take a hyper-generalist approach with plans to invest globally in everything from venture-stage startups to large buyouts.

In Fund X, the size of Warburg Pincus’ equity checks ranged from less than $10 million (Series B funding for electric vehicle technology startup Mission Motors) to upwards of $600 million (the leveraged buyout of eye-care company Bausch & Lomb), according to a portfolio synopsis included in the Verus report. As a percentage of cost, Warburg categorizes roughly a quarter of its investments as early stage deals.

The broad range of equity check sizes, coupled with the fund size, will likely create a large portfolio of investments for Fund XII, probably 60 to 90 companies, according to the Verus report. It also reduces the average size of Warburg’s equity checks, which stood around $150 million over the last 10 years.

That’s considerably less than what’s seen in other mega-funds, including those being marketed by competitors such as Blackstone Group and TPG Capital. TPG expects deals from its next flagship fund to average roughly $300 million in size, according to LP memos obtained by Buyouts. Blackstone’s average equity contribution to growth-equity investments over its three previous flagship funds exceeded $180 million, to say nothing of the $684 million the firm averaged for large buyouts, according to a Blackstone Capital Partners VII fund presentation.


The breadth of Warburg’s portfolio provides some protection through diversification. A portfolio of 60 to 90 investments is bound to include a few duds.

Verus’ analysis of the firm’s Fund X portfolio notes full markdowns on the firm’s $156 million equity investment in Gulf Coast Energy Resources, as well as its $44.5 million equity stake in Laqshya Media Private.

The effects of those losses were cushioned by grand slams like China Biologic Products Ltd, a $168.2 million equity investment grossing 69.7 percent as of March 31, according to the Verus report.

Similarly, Fund X’s $120 million stake in Coyote Logistics was grossing 45.7 percent and a 7.8x multiple as of the same date. The logistics company sold for $1.8 billion in July.

Warburg Pincus’ “performance is a result of a strong sourcing network, a detailed due diligence process, active portfolio company engagement and a thoughtful, flexible approach to portfolio company exits,” Verus wrote in its report. “Investors who have a targeted allocation to private assets and in particular a desire to increase or maintain their exposure to diversified private equity investments would be well-served to consider an allocation to Warburg Pincus Private Equity XII.”