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Cerberus Said to Seek $4 Billion for Fund as Markets Rebound

Cerberus Capital Management LP is seeking to raise about $4 billion for its next private-equity fund, according to two people familiar with the plan.

The new pool will be smaller than its predecessor fund, which attracted $7.5 billion from investors, said the people, asking not to be named because the information is private. The firm is also aiming to raise a fund dedicated to buying mortgage assets as well as two loan funds, one of the people said.

Cerberus, based in New York, is gathering money after the firm recouped 90 percent of its 2007 wager on automaker Chrysler LLC by selling its former lending unit. Stephen Feinberg, Cerberus’s chief executive officer, said yesterday he sees opportunities to buy assets from European banks in countries including Spain, Italy and Germany.

Peter Duda, an outside spokesman for Cerberus, didn’t immediately return a phone call seeking comment.

Private-equity managers are trying to attract new commitments after fund-raising in the first quarter fell to its lowest level since 2003, according to researcher Preqin Ltd. KKR & Co., the firm run by Henry Kravis and George Roberts, is raising a new pool for North American buyouts.

Buoyant public markets and cash-rich corporate acquirers are allowing buyout firms to sell some of their existing investments, enabling them to show profits to current clients as they ask for more money. Cerberus may benefit from salvaging the Chrysler investment as well as the sale of Talecris Biotherapeutics Holding Corp. to Grifols SA for $2.95 billion.

24% Gain

Cerberus’s Series 4, its most recent fund, gained 24 percent in 2010, according to a person familiar with the performance. The fund, started in 2007, has averaged annual returns of 12 percent before fees, said the person, who asked not to be named because the results are private.

Firms face a tougher fund-raising environment as pensions, endowments and sovereign-wealth funds make smaller commitments and seek to pare the number of managers they back. New funds are likely to be about half of their managers’ previous efforts, said Guy Hands, founder of private-equity firm Terra Firma Capital Partners Ltd., today at the Super Return Conference in Boston.

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