Capital Markets

New Capital Shows Private Equity Signs of Life

Carlyle, Actis tell of successes in raising money for funds.
Stephen TaubDecember 1, 2008

Private equity has a heartbeat, at least if one can judge from the ability to raise sizable sums.

In the largest case of recent capital-raising, Carlyle Group pulled in nearly $14 billion for a fund. It hopes to raise as much as $15 billion, according to Reuters, which cited a source familiar with the situation. The fund was launched in the spring of 2007.

Meanwhile, Actis, which specializes in investing in emerging markets, announced that it had closed the $2.9 billion private equity fund Actis Emerging Markets 3 (AEM3), exceeding a target of $2.5 billion. The buyout firm proclaimed that this is one of the largest dedicated emerging markets private equity funds closed this year and doubles the amount raised by Actis in 2004.

AEM3 includes commitments from 100 investors from across the globe, including a number of first-time investors in emerging markets. The money will be used to build a diversified portfolio of between 30 and 40 investments across Africa, China, India, Latin America, and Southeast Asia, typically investing a minimum of $50 million of equity capital in buyout and growth transactions. Actis has been investing exclusively in emerging markets for nearly 60 years. It has raised $7.6 billion of funds and has 11 offices throughout Africa, China, Latin America, South and South East Asia.

This has been an especially tough environment for private equity to raise capital, of course. According to Reuters, a total of 117 funds raised $82.3 billion from investors in the third quarter of 2008, the lowest dollar amount raised since the first quarter of 2005. In fact, the wire service said that Carlyle had confirmed that it is shutting its operation in central and eastern Europe and its leveraged finance team in Asia.

Meanwhile, a Bloomberg report on Monday indicated that many wealthy universities are joining a move among other institutional investors to divest their holdings in private-equity funds. The wire service said that secondary sales of private-equity funds could top $100 billion during the next year. These investments included interests in funds managed by KKR & Co., Madison Dearborn LLC, and Terra Firma Capital Partners Ltd.

The stakes are being offered at discounts of at least 50 percent, according to Bloomberg.

Among investors selling their stakes are Harvard University, Columbia University, and Duke University, as well as American International Group Inc. and bankrupt Lehman Brothers Holdings Inc., according to the report.

The California Public Employees’ Retirement System (CalPERS), the nation’s largest pension fund, recently said it sold 26 percent of its private equity fund interests. A calculation from Prequin, a group that compiles information about alternative assets, shows that the selloff includes interests in 74 funds, leaving CalPERS’ total portfolio standing at 288 funds overall. The net asset value of funds sold is $1.9 billion, or 9 percent of its overall portfolio.

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