Cerberus Misses Target for Fund V, Raises $2.61B

(Reuters) – Cerberus Capital Management LP has completed fundraising for its latest flagship private equity fund, raising $2.61 billion to invest in distressed assets, two people familiar with the matter said on Wednesday.

CIP V is the first Cerberus private equity fund to complete fundraising after the firm said in December it would sell Freedom Group Inc., the maker of the Bushmaster rifle that was used in the shootings at Sandy Hook Elementary School in Newtown, Connecticut.

Cerberus started marketing the fund, Cerberus Institutional Partners V (CIP V), in 2011 with a $3.75 billion fundraising target, and later moderated its expectations to between $3 billion and $3.5 billion.

There is no evidence, however, that the Freedom Group controversy weighed on the CIP V fundraising, one of the people said, adding that its completion brings the capital Cerberus has raised from investors in the last two years to over $11 billion. This includes fund offerings in structured products, non-performing loans, mortgage-backed-securities and distressed corporate debt.

CIP V’s predecessor, the $7.5 billion CIP IV that was raised in 2006, was valued at 1.33 times its investors’ money and had a net internal rate of return of 7.3 percent as of the end of June 2012, according to the University of California, a Cerberus investor.

This was a weaker performance compared to the University’s total private equity portfolio, which was valued at 1.6 times the cost its original investments.

The people spoke on condition of anonymity because the details of the fundraising are confidential. A Cerberus spokesman declined to comment.

Founded in 1992, Cerberus has specialized over the years in investing in distressed companies and debt. It now boasts over $20 billion of assets under management.

Dow Jones reported on the completion of the CIP V fundraising earlier on Wednesday.

(Reporting by Greg Roumeliotis in New York; Editing by Edwina Gibbs)

Image credit: Photo courtesy of ShutterStock