Firms & Funds

HgCapital prepares first and final close for Fund VIII

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HgCapital, U.K., private equity
A British Airways airplane comes in to land at Heathrow Airport in west London July 30, 2010. REUTERS/Luke MacGregor
  • HgCapital targeting 2 bln pounds, could raise up to 3 bln
  • PSERS commits 95 mln pounds to Fund VIII
  • Target companies: enterprise values up to 500 mln pounds

HgCapital will likely hold a first and final close before year-end, a Portfolio Advisors’ memo included in Pennsylvania Public School Employees’ Retirement System documents shows.

The firm set a 2 billion pound ($2.37 billion) target when it launched HgCapital VIII this fall. The fund is oversubscribed and could raise as much as 3 billion pounds, Dow Jones reported earlier this year.

The firm’s previous fund closed on 2 billion pounds in 2013 and was netting a 24 percent internal rate of return, according to a PSERS memo. The $50.2 billion retirement system re-upped 95 million pounds to Fund VIII on Dec. 7.

PSERS’s commitment remains subject to negotiation of final terms and conditions. The firm did not respond to a request for comment.

HgCapital is led by Chairman Tom Attwood and Senior Partner Nic Humphries. Humphries took the senior partner’s role in 2007 as part of a planned succession and oversaw a tightening of HgCapital’s investment approach in 2010 and 2013, a PSERS memo says.

The firm’s strategy focuses on companies with business-to-business models. HgCapital stopped investing in healthcare companies in 2013 “due to their cyclicality and poor historical performance. Hg should produce better returns going forward by concentrating on what they do best,” PSERS staff wrote in a memo.

HgCapital will use its new fund to make control investments in Northern European middle-market companies, typically with enterprise values of 100 million to 500 million pounds, the Portfolio Advisors memo shows. The fund’s portfolio will likely include around 12 to 15 companies in telecom, media, technology, industrials and services.

“HgCapital has a broad pipeline of potential transactions to selectively make investments in HgCapital 8. As of June 30, 2016, HgCapital is currently tracking approximately 500 opportunities of which 240 of these should be investment opportunities over the next 18 months,” according to a PSERS staff memo.

HgCapital has offices in London and Munich. The firm has 5.5 billion pounds of assets under management.

Action Item: More about HgCapital: www.hgcapital.com

A British Airways plane comes in to land at Heathrow Airport in west London on July 30, 2010.  Photo courtesy Reuters/Luke MacGregor