Kelso approaches $2.5 bln target on Fund IX

  • Louisiana Teachers’ commits up to $100 mln
  • Firm has $1.95 bln circled
  • Kelso increased GP commitment from $500 mln to $625 mln

Kelso & Company plans to hold a final close at or around its $2.5 billion target for its ninth fund at the end of March, a market source said. To date, the firm has raised about $1.95 billion, including a $625 million commitment from the GP.

The fund received a recent boost from the Teachers’ Retirement System of Louisiana, whose board of trustees approved a commitment of up to $100 million to Kelso Investment Associates Fund IX at its January 7-8 meeting, said Deputy CIO Maurice Coleman in an email.

Louisiana Teachers’ board considered but ultimately voted down an earlier proposed $100 million commitment in October 2014 after CIO Philip Griffith and Director Maureen Westgard commented on staff’s concerns regarding the fund.

It’s not clear how Louisiana Teachers’ eventually warmed to Fund IX, but the firm did put about $730 million of the vehicle’s capital to work since then, acquiring businesses like Sirius Computer Solutions, asset management platform American Beacon and Ajax Resources, an oil and gas production company. To date, the vehicle has invested in five deals. The new investments provide LPs coming in later a better sense of how the fund will be deployed.

The performance of Fund IX’s predecessor also improved over the last year, according to LP documents. Kelso Associates Fund VIII, a $5.1 billion 2007 vintage, netted an 8.8 percent internal rate of return through June 30, 2014, according to a Los Angeles City Employees’ Retirement System report. A Hamilton Lane report obtained through a records request indicates Fund VIII’s net IRR climbed to 10.5 percent as recently as September 30.

Furthermore, Kelso appears to have increased the size of its GP commitment to Fund IX, from $500 million to $625 million, according to an analysis of investment memos and market sources.

Kelso began marketing Fund IX in mid-2014.

The firm was founded by Louis Kelso in 1971. Kelso & Company raised its first fund in 1980 and went on to raise approximately $9.8 billion over the next 30 years.

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Photo: The image of United States President George Washington is seen on an engraving plate for a US one dollar bill at the Bureau of Engraving and Printing in Washington November 14, 2014. REUTERS/Gary Cameron