Hellman & Friedman LLC is planning a new fund similar in size to its $8.9 billion predecessor, which would make it the largest private-equity fund this year, according to two people with knowledge of the fundraising.
The San Francisco-based firm expects to start gathering capital for its eighth fund by May, said the people, asking not to be identified because the information is private. The prior vehicle, which raised money in 2009 and started investing in 2011, produced about a 3 percent net internal rate of return as of Sept. 30, according to performance data of the Washington State Investment Board.
Buyout firms are raising the most capital since the 2008 financial crisis as pension funds look to allocate money after asset values jumped last year and private-equity groups exit investments and return cash back to their clients. The value of global pension fund assets increased by more than $2 trillion in 2013 and now stands at almost $25 trillion, David Rubenstein, Chief Executive Officer of Carlyle Group LP said on a February call with investors, citing Organisation for Economic Co-operation and Development data.
Mary Beth Grover, a spokeswoman at The Abernathy MacGregor Group, declined to comment on behalf of Hellman & Friedman.
Private-equity firms globally have raised $95 billion this year, the most in a first quarter since the financial crisis, when $173 billion was collected during the same period in 2008, according to data by London-based researcher Preqin Ltd. Last year, Apollo Global Management LLC, Carlyle and Silver Lake Management LLC raised multi-billion pools contributing to the strongest year for buyout capital raising since 2008.
The fundraising has left private-equity shops sitting on $416 billion to invest as of February, as prices for deals reach pre-crisis highs. The median deal multiple stood at 10.2 times earnings before interest, taxes, depreciation and amortization, or Ebitda, in 2013, compared to a high of 9.6 times in 2008, according to Pitchbook Data Inc.
Hellman & Friedman, led by Philip Hammarskjold, has generally targeted the services sector, with investments in software, internet, digital media, financial services, insurance, business and marketing services, industrial and energy and health care. Founded in 1984 by Warren Hellman, who died in 2011, and Tully Friedman, who heads San Francisco-based private-equity firm Friedman Fleischer & Lowe LLC, the firm participates in buyouts, restructurings and minority investments.
Hellman & Friedman’s $8.4 billion fund from 2007 was producing a 1.4 times multiple and an 8.5 percent net IRR, the data shows. The firm typically invests $300 million to $1 billion in businesses located in developed markets, including the U.S. and Europe, according to the firm’s website.
In February, Blackstone Group LP and GIC Private Limited agreed to purchase a minority stake in Hellman & Friedman-backed Kronos Inc. In January, Hellman & Friedman and Stone Point Capital LLC agreed to sell Sedgwick Claims Management Services Inc. to KKR & Co. for $2.4 billion. Last month, Hellman & Friedman agreed to purchase education-analytics company Renaissance Learning Inc. from London-based Permira Advisers LLP for $1.1 billion.