Bain Capital nears $5 bln for eleventh flagship fund

Reuters

* First marquee fund from Bain since financial crisis

* Targets mostly North American deals

* Seeking acquisitions of $200 mln to $500 mln

By Steve Gelsi

Oct 11 (Buyouts Magazine) - Bain Capital has raised nearly$5 billion for its eleventh flagship buyout fund, its firstsince the 2008 financial crisis, according to a potentialinvestor in the fund.

Co-founded by 2012 Republican presidential candidate MittRomney, Bain Capital plans to reach its target of $6 billion forBain Capital Fund XI by the end of the year, the potentialinvestor said. Romney left Bain Capital in 1999.

Bain Capital has drawn commitments of about $4 billion fromlimited partners, and plans to invest about $800 million of itsown capital in the fund for about $4.8 billion for the corebuyout fund thus far, the potential investor said.

Bain Capital has typically invested at least 10 percent ofits own money in its past funds. Each flagship fund has alsoraised a smaller co-investment vehicle for limited partners togain access to specific deals. Bain Capital X had a $10 billiontarget for the main fund and $5 billion for co-investments. FundIX closed with $8 billion and a $2 billion co-investmentvehicle.

The Boston-based private equity firm disclosed In April thatit had raised $2.3 billion for Bain Capital Fund XI in a Form Dfiling with regulators.

The Pennsylvania State Employees' Retirement System, whichreviewed the new offering, has disclosed that the firm projectsa minimum internal rate of return (IRR) of 20 percent.

The pension system also said that Bain Capital Fund XI plansto make mostly North American investments in the $200 million to$500 million range, with the flexibility to move up to $1billion in bigger deals.

Bain Capital's most recent buyout fund, Fund X, dates backto 2008 and raised $10.7 billion. The fund had generated a 2.7percent IRR as of Dec. 31, 2012, according to data from theRegents of the University of California. The vintage 2006 BainCapital Fund IX raised $8 billion and logged an IRR of 7.1percent as of the same date. Bain Capital Fund VIII from 2004has an IRR of 11.8 percent.

Private equity fund sizes at the large end of the markethave dipped since the financial crisis. But some firms havemanaged to build up sizeable investment vehicles as the economypicks up steam and low interest rates encourage allocationsinto buyouts from institutional investors.

Apollo Global Management LLC is mulling a move toget investor permission to increase the cap of Apollo InvestmentFund VIII LP to as much as $20 billion, according to a report byBloomberg.

Carlyle Group LP has set a cap for Carlyle PartnersVI LP at $12 billion. And Kohlberg Kravis Roberts & Co plans to draw $10 billion for its North American XI Fund LP,with more than $8 billion raised as of the summer, according tothe firm.

Silver Lake, the buyout shop working with Michael Dell tobuy Dell Inc, raised $10.3 billion for Silver LakePartners IV in an effort that wrapped up in April. BlackstoneGroup LP completed fundraising last year at $16 billionfor its latest buyout fund, Blackstone Capital Partners VI LP.

With about $70 billion of assets under management, BainCapital ranks as one of the largest private equity firms in theworld, with holdings including retailer Toys 'R Us, The WeatherChannel and Bright Horizons Family Solutions.

Buyout firms traditionally charge a 2 percent management feeon committed capital during the investment period and a 20percent carried interest fee on investment profits, but back inthe late 1990s Bain Capital moved to charge a 30 percent fee.

With Fund XI Bain Capital offered investors a choice offees. Bain Capital offered investors a 1.5 percent managementfee/20 percent carried interest fee structure after providinginvestors a 7 percent preferred return rate. It's also offereda 0.5 percent management fee/30 percent carried interest feestructure with no preferred rate of return.

The private equity firm traces its roots back to 1984.

A spokesperson from the firm declined to comment.

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