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PAI Partners plans final close for 4 bln euro fund in early 2018

  • A first close is expected in December
  • Fund VII to invest in upper-mid-market Europe companies
  • Pennsylvania Public School Employees’ re-ups for 125 mln euros

PAI Partners is targeting 4 billion euros ($4.69 billion) for its latest flagship private equity fund for investments in upper-mid-market European companies, according to an investor memo. The fund does not have a hard cap.

The fund is slotted to hold a first close in December, with a final close scheduled for the first quarter of 2018, according to a Hamilton Lane memo released by Pennsylvania Public School Employees’ Retirement System.

The system committed up to 125 million euros to PAI Europe VII at its Oct. 5 meeting, according to its website. The new commitment remains subject to final negotiation of terms and conditions.

The new allocation would extend the $53.5 billion pension system’s relationship with the firm to five commitments totaling 725 million euros.

Pennsylvania Public School Employees’ existing commitments with PAI Partners have notched a 26.1 percent net internal rate of return and 2.22x multiple, according to an investor memo. Those aggregate returns are somewhat skewed by the public pension’s 300 million euro commitment to PAI Europe III, a 2001 vintage that’s netted a 29.6 percent IRR and 2.76x multiple since inception.

That said, the firm’s subsequent funds have consistently netted double-digit returns, the investor memo shows.

In its report, Hamilton Lane noted that “PAI has proven its ability to generate consistent returns across its prior funds.” The firm will also make a commitment equal to at least 2 percent of Fund VII’s aggregate size, the Hamilton Lane memo says.

Fund VII’s strategy is similar to that of the firm’s previous funds, with PAI planning to focus its investments in the business services, food and consumer goods, general industrials, healthcare and retail and distribution sectors.

PAI Partners typically uses equity to account for between 30 percent and 50 percent of its portfolio companies’ capital structures, according to the memo.

“Importantly, 76 percent of PAI’s returns have been generated through EBITDA growth. This reflects PAI’s core focus on driving fundamental value in its portfolio companies,” according to the investor memo.

PAI Partners could not be reached for comment.

Action Item: To read the Pennsylvania memos, visit http://bit.ly/2fQOyFi

British pounds and euro banknotes are pictured on June 24, 2016, in a bank at the main train station in Munich, Germany. REUTERS/Michaela Rehle