WP Global Nearing $400M-plus FoF Close

Firm: WP Global Partners

Fund: Small and middle market LBO fund of funds

Target: $500 million

In the next few months WP Global Partners plans to close at between $400 million and $500 million a fund of funds earmarked for firms that invest in the small and middle markets.

The Chicago-based firm, which isn’t interested in backing funds much bigger than $1.5 billion, has long held to the thesis that returns are highest in the smaller markets, where deal flow is plentiful and leverage multiples are reasonable. Expect roughly 80 percent of the the fund to end up with U.S.-based firms, the balance going with international funds. WP Global reserves 15 percent of its capital co-investments, and occasionally backs venture funds.

This is WP Global’s first new fund since its formation in 2005. Until now, the firm has primarily been occupied with managing about $600 million for two clients, including $350 million for Swedish pension Första AP-Fonden. Since 2005, the firm has committed a little over $200 million to some 30 funds, according to one source. Among them is Fifth Street Mezzanine Partners II, which closed in early 2006 with commitments of $157 million.

Founder Donald Phillips previously was the chief investment officer and CEO of WestAM, the asset management division of German bank WestLB AG. WestAM recently combined with Mellon Financial Corp. in a joint venture called WestLB Mellon Asset Management. Prior to WestAM, Phillips was president of fund-of-funds manager Forstmann-Leff International. Also on his resume is a stint at Sam Zell’s Equity Institutional Investors, the predecessor to Equity Office Properties, which The Blackstone Group recently bought, making it the largest buyout ever.

Phillips has previously expressed a soft spot for first-time and second-time funds. “When a firm is working on its first fund, I would argue that that partnership will never have a higher need to prove to themselves—let alone to their investors—that they can do the job,” Phillips told Buyouts last year. “They are highly disciplined in their focus and it’s probably going to be their second-best performing fund.” A second fund, he said, is typically the best performing, in part because deal flow is thicker, but the group still has something to prove.

Three other WP Global managing directors matriculated from WestAM and Forstmann-Leff International. They are Tom Thompson, in Chicago, who also worked with Phillips at Ameritech and led its $1 billion real estate portfolio; Celia Chapman, in Los Angeles, who previously worked for the GM/Hughes Electronics pension investing in LBO funds; and Greg Oberholtzer, in New York, who is a veteran of the analytical trading division of Jefferies Group. Also from WestAM and Forstmann-Leff International is WP Global CFO Shannon Murphy.

Executives at WP Global declined comment for this article.—M.C.