H.I.G. raising pool that will allow LPs to invest in future funds, Hurdle rates gradually creep downward
Happy Friday Hubskis!
This week was weirdly busy in the newsroom, especially on the deal front. Seems many of you are scrambling to get deals signed before the world stops in August. My M&A folks have been running ragged!
Interesting structure: Here’s a new one – H.I.G. Capital is targeting $1 billion for a fund-of-funds that will guarantee investors allocation in 12 of the firm’s own future funds. The pool, Strategic Partners Fund, will also include co-investments on an opportunistic basis alongside the underlying funds.
Strategic Partners Fund launched in September, according to SEC filings. The fund appears to be targeted to a select group of H.I.G. LPs “to lock in allocations to their oversubscribed fund lines,” according to an investment report from Texas Municipal Retirement System. Texas Municipal approved a $200 million commitment to the fund, and $100 million for co-investments, pending legal negotiations.
H.I.G.’s Bayside Loan Opportunity Fund IV, H.I.G. Brazil & Latin America Partners and H.I.G. Middle Market Fund II are among the firm’s recently launched funds.
The firm also last year launched its Advantage Buyout Fund, targeting $2.25 billion for investments in less-complex situations and stable companies with lower return profiles than in its core private equity funds. It’s not clear how much Advantage Buyout fund has raised to date.
Normally LPs get the chance to reserve future commitments in new funds through separate accounts or strategic relationships like those formed between New Jersey’s state pension and Blackstone Group, and Teacher Retirement System of Texas and Apollo and KKR.
H.I.G. seems to have come up with a way to give its LPs this sort of future access, but not through a separate account. I’m not clear on what the economics of the fund look like, so would be interesting to see what kind of fees are attached to this fund. I’ll keep an eye on this as it moves through the market.
SUBSCRIBE to get the Wire in your inbox every morning. It’s free.