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Platinum sees strong demand as it nears target for Fund IV

  • Platinum to close on about $4.2 bln
  • No official cap; could be set at $5.5 bln
  • Original target was $4.5 bln

Platinum Equity is set to close on around $4.2 billion as it heads for the cap on its fourth fund, according to a person with knowledge of the fundraising.

Fund IV is seeing heavy demand, and limited partners will likely face cuts to their desired commitments, the person said.

The Los Angeles firm could cap the fund at $5.5 billion, the person said. Platinum did not set a hard cap when it started raising Fund IV earlier this year, but sources previously told Buyouts the firm was aiming to raise $4.5 billion.

Daniel Whelan, a principal at Platinum, did not respond to a request for comment.

The firm, founded by Chairman and Chief Executive Tom Gores in 1995, raised $3.75 billion for its third fund in 2013. Fund III generated a 34.8 percent net internal rate of return as of Dec. 31, 2015, Los Angeles City Employees’ Retirement System data shows.

Platinum focuses on businesses with recurring revenues and long-term customer relationships that are undermanaged, underperforming and having operational difficulty, an investment memo from Pennsylvania Public School Employees’ Retirement System said.

The firm, which had about $5.2 billion under management as of June 30, buys non-core or underperforming assets of larger companies, according to an investment memo from Portfolio Advisors prepared for the Pennsylvania pension.

Platinum will charge a management fee on Fund IV of 1.75 percent of committed capital until the earlier of the end of the commitment period or the date on which a successor fund makes its initial investment, Platinum’s Form ADV says. After that, the fee drops to 1.5 percent of capital contributions for investments that have not been exited or written down, the ADV said.

Earlier this month, Platinum acquired Fabcon, a  Savage, Minnesota, maker of concrete wall panels for non-residential construction.

Action Item: Platinum’s Form ADV: https://adviserinfo.sec.gov/IAPD/IAPDFirmSummary.aspx?ORG_PK=161491

A man cycles on the Venice Beach boardwalk in Los Angeles on September 13, 2016. Photo courtesy Reuters/Lucy Nicholson