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Editor’s Letter: Coming back in a big way

  • Hellman could target up to $16 bln for Fund IX
  • Fund would be a big jump from prior pool
  • GPs go after multiples strategies

We got a sense of how much Hellman & Friedman is looking to raise for Fund IX, and it’s a big ’un: $15 billion to $16 billion. That amount would put Hellman solidly in megafirm territory, on the level of a TPG, Blackstone and the other major shops.

Hellman is ratcheting its target well beyond the prior fund, which closed in 2014 on $10.9 billion, if it indeed seeks up to $16 billion for the ninth fund. Several LPs I talked to were not aware Hellman was back in market with the new pool and were surprised the firm was already in market.

Based on performance and Hellman’s reputation for being one of the most LP-friendly shops in the market, I imagine Fund IX will be raised in a blink.

Hellman is different from other firms in that it’s not public nor has it evolved into a multistrategy manager. It hasn’t started a family of credit funds, for example, or small-cap-focused pools to target smaller opportunities. It hasn’t developed a real estate business.

That’s not to say it isn’t thinking about these things; the firm is among the quietest in the business and rarely talks to the media.

The temptation to expand the franchise into new areas must be huge, especially in this environment with external investors prepared to invest in the management company, providing capital for strategy expansion.

LPs these days often quip that every GP is raising a credit fund, or carving out a pool for small investments — new vehicles that create new fee streams. But again, LPs are more than happy to find another strategy run by a trusted manager into which they can commit their capital. It’s this era’s common refrain: What else are they going to do with the money?

So it’s unusual to see a firm sticking purely to a buyout strategy. And also somewhat refreshing. Hellman is unusual in another way in that it doesn’t charge transaction fees. It’s considered one of the most LP-friendly firms in the market, which doesn’t hurt its ability to raise a lot of money from LPs.

Another firm that has stuck to its original strategy is Leonard Green, which has a strong track record and has raised a lot of money. As a nod to its dedication to its chosen strategy, Leonard Green got an outside investment from Blackstone Group that it solely used to cash out executives across the organizations. None of the proceeds were used to expand into new strategies.

Knowing what you do and doing it well: It’s a novel concept these days.

Private Equity Editor Chris Witkowsky reflects at home. Photo by Wendy Witkowsky.