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Montagu Private Equity Closes $3.6B For New Deals

Montagu Private Equity, the former European buyouts business of HSBC, has raised 2.5 billion euros ($3.6 billion) for new deals, Reuters reported. The firm’s fourth fund attracted investment from pension funds, insurance companies and sovereign wealth funds from the United States, Europe, the Middle East and Asia, Reuters wrote. The firm surpassed its initial 2.5 billion euro target, and will invest in deals worth between 100 million euros and 1 billion euros.

(Reuters) – Montagu Private Equity has raised 2.5 billion euros ($3.6 billion) for new deals, signalling investors are loosening their purse strings once again for top-performing buyout firms.

Montagu, the former European buyouts business of HSBC (HSBA.L), said on Tuesday its fourth fund attracted investment from pension funds, insurance companies and sovereign wealth funds from the United States, Europe, the Middle East and Asia.

Demand was substantially above the 2.5 billion euro target, the European-focused firm, which invests in deals worth between 100 million euros and 1 billion, said, suggesting renewed investor appetite for new private equity funds.

Many big name private equity firms are running low on capital raised in the boom years but have been reticent about going back to investors, many of which have less money to put into buyouts and are increasingly picky about the funds they back.

The amount raised by Montagu’s latest fund eclipses the 2.3 billion euros it raised in 2005 for investments in companies including waste management group Biffa [WSAQTB.UL] and, more recently, survival suit maker Hansen Protection.

But the fundraising market globally remains relatively subdued compared with pre-financial crisis levels, with just $42 billion raised in the first quarter, a far cry from the peak in 2007 when firms raised more than $210 billion in the second quarter, according to data firm Preqin.

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Private equity raised close to $2 trillion between 2006 and 2008, capital which helped fuel a leveraged buyouts boom as firms chased ever larger deals.

But when the bubble burst, many businesses were crippled by high levels of debt and large numbers of investors, left reeling by steep falls in the value of their private equity portfolios, froze new commitments to the buyouts industry.

As company valuations have recovered and investee companies avoided default, investors are making a cautious return to the asset class, targeting only the best performing firms with smaller individual investments.

Montagu has made annualised returns exceeding 38 percent over the last 17 years, earning investors more than twice their initial investments.

Others buyout firms have broached fundraising markets but have spent some time warming up existing investors and talking to potential new investors, including cash-rich Middle East and Asian sovereign wealth funds.

The time needed to raise a private equity fund has lengthened to 16 months from 10.6 months in 2006, according to Preqin.

BC Partners has so far raised 4 billion euros towards its latest buyout fund, beating initial expectations and providing a ray of hope to the many firms expected to follow it this year.

Rival Cinven last month kicked off a new fundraising drive, targeting more than 5 billion euros for new deals. [ID:nLDE72M0TQ] (Editing by Dan Lalor and David Holmes) ($1 = 0.6883 euro)