Firms & Funds

Audax offers two fee/carry options for latest flagship fund

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  • Audax offers 1/30 or 2/20 fee/carry split
  • Fund V cap at $2.25 bln, not clear if that includes GP commitment
  • Firm already raised $1.5 bln

Audax Group offers a choice of management fee/carried interest structures in its next flagship private equity fund: a 1 percent management fee and 30 percent carried interest rate, or the standard 2 and 20, according to an LP with knowledge of the fund.

Audax is in market with Audax Private Equity Fund V, which has a cap of $2.25 billion, according to two LPs who have heard the fund pitch. Fund V collected about $1.5 billion as of earlier this month, the second LP said. The GP will commit “several hundred million dollars” to the fund, according to the first LP. It’s not clear if the $2.25 billion cap includes the GP commitment.

Audax did not respond to a request for comment.

Audax filed a Form D with the SEC on August 11. The filing did not disclose the target or amount raised. It listed Geoffrey Rehnert and Marc Wolpow as executive officers on the fund.

About two-thirds of LPs who have committed to the fund so far chose the traditional 2 and 20 structure, the first LP said.

“You can argue this either way,” the LP said. “[With 1 and 30] you’re better aligned with the manager, but you’re paying a headline-busting 30 percent carry. I’m a fan of giving the GP his due once he’s [returned] over a certain level. The ability to pay lower fees up front has you better aligned with the manager.”

The two LPs expressed concern about the jump in fund size, which is an 80 percent increase from the $1.25 billion Audax raised for Fund IV in 2012. That prior fund generated a 20.77 percent internal rate of return and a 1.25x multiple as of March 31, according to alternative assets data provider Bison.

Audax’s third private equity fund, which closed on $1 billion in 2007, generated a 14.6 percent net IRR and a 1.7x multiple as of Dec. 31, according to the California Public Employees’ Retirement System.

Several firms this year have boosted fund sizes well beyond their previous vehicles, including American Industrial Partners, which is expected to close its sixth fund on $1.75 billion, more than double the $717.5 million it raised for Fund V. Likewise, Clearlake Capital Group closed its fourth flagship fund on $1.38 billion, a big leap from the $785 million it raised for Fund III in 2012; Genstar collected $2 billion earlier this year for its seventh fund, doubling the amount it raised for its prior fund in 2012; and Vista Equity Partners is targeting between $750 million and $1 billion for its sophomore credit fund, four to five times more than the $200 million it raised for the debut credit fund.

Action Item: Read the Audax Fund V Form D here: http://1.usa.gov/1L8Zz0D