John Grayken, the billionaire founder of Lone Star Funds, will invest $350 million of his own fortune in the company’s latest fund targeting distressed assets across the U.S., Europe and Japan.
The Dallas-based private-equity firm expects to raise about $7 billion for Lone Star Fund IX, according to the minutes of a March meeting of the New Mexico Educational Retirement Board, or NMERB. Grayken’s contribution will be the most he’s invested in one of his firm’s funds and will top the $330 million he placed with a separate property fund last year.
Grayken, 57, is putting chunks of his own fortune on the line as he scours the globe for distressed assets in the wake of the financial crisis. The investments may lure outsiders to follow him and put money in Lone Star’s funds, the latest of which is focusing on non-commercial real estate loans and “asset rich” financial companies.
“We always like to see a substantial investment by the general partner of any fund,” said Bob Jacksha, Santa Fe-based chief investment officer of the NMERB, which manages about $10.7 billion of teachers’ pensions in New Mexico. “It helps promote a healthy alignment of interest.”
Jed Repko, a spokesman for Lone Star, declined to comment.
The NMERB agreed to invest $100 million in Lone Star Fund IX, according to the minutes. Other investors include the Oregon state pension fund, which will put in $300 million, according to an April 30 statement.
The Lone Star IX fund has raised $5.3 billion so far, according to a filing last month with the Securities and Exchanges Commission. The total amount raised so far is closer to $5.7 billion, Dow Jones reported last month, citing a person familiar with the matter.
“The strategy is to take advantage of the regulatory requirements in the banking sector and the deleveraging in the U.S. and Europe,” according to the NMERB minutes. “They feel this will continue to provide investment opportunities over the next several years.”
Lone Star will spend 40 percent of the cash raised on assets in the U.S., 50 percent in Europe and 10 percent in Japan, according to the NMERB minutes. The company’s investments since the financial crisis include Irish property debt and German financial firms.
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