Bain Capital nears $5 bln for eleventh flagship fund

* 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 first since the 2008 financial crisis, according to a potential investor in the fund.

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

Bain Capital has drawn commitments of about $4 billion from limited partners, and plans to invest about $800 million of its own capital in the fund for about $4.8 billion for the core buyout fund thus far, the potential investor said.

Bain Capital has typically invested at least 10 percent of its own money in its past funds. Each flagship fund has also raised a smaller co-investment vehicle for limited partners to gain access to specific deals. Bain Capital X had a $10 billion target for the main fund and $5 billion for co-investments. Fund IX closed with $8 billion and a $2 billion co-investment vehicle.

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

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

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

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

Private equity fund sizes at the large end of the market have dipped since the financial crisis. But some firms have managed to build up sizeable investment vehicles as the economy picks up steam and low interest rates encourage allocations into buyouts from institutional investors.

Apollo Global Management LLC is mulling a move to get investor permission to increase the cap of Apollo Investment Fund VIII LP to as much as $20 billion, according to a report by Bloomberg.

Carlyle Group LP has set a cap for Carlyle Partners VI 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 to the firm.

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

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

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

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

The private equity firm traces its roots back to 1984.

A spokesperson from the firm declined to comment.