Warburg Pincus kicks in $200 mln to financial-services fund

  • New fund includes $200 mln commitment from GP
  • Will invest 50-50 alongside Warburg’s main fund
  • Warburg Pincus also raised China, energy-focused funds

Warburg Pincus closed its new financial-services fund on $2.3 billion, hitting the hard cap it set for outside investors.

Roughly 60 percent of the fund’s limited partners have invested in previous Warburg Pincus funds, the firm says. The fund’s GPs committed another $200 million vehicle on top of the fund’s hard cap.

Warburg Pincus Financial Sector LP was marketed with a $1.6 billion target, an LP memo obtained by Buyouts shows.

The vehicle is the firm’s first dedicated fund for financial-sector deals. Through its primary funds, Warburg Pincus’s portfolio of realized and partly realized financial-sector investments had grossed a 29 percent internal rate of return and 2x multiple on invested capital since the firm’s inception, the LP memo says.

The financial-sector team is led by Michael Martin and includes 14 managing directors with an average tenure at the firm of more than 10 years, the memo says.

Like its other sector- and geography-specific companion funds, Warburg Pincus’s financial-sector vehicle will invest on a 50-50 basis alongside the firm’s main funds.

Because they invest alongside the flagship vehicles, companion funds didn’t require Warburg to bring on new investment teams or hire additional personnel, according to a source with knowledge of the firm.

They essentially function as a way to keep the main fund from concentrating too much of its investment capital in certain sectors and strategies, while giving LPs an opportunity to increase their exposure to segments of the firm’s overall portfolio, two sources said.

The firm’s most recent flagship vehicle closed on $13.4 billion in 2015. Last year, the firm raised a $2 billion fund to pursue investments in China. An energy-focused fund closed on $4 billion in 2015.

Warburg Pincus was founded in 1966. The firm has more than $44 billion under management.

Former U.S. Treasury Secretary and Warburg Pincus President Timothy Geithner speaks at a discussion, “Are We Safer? The Case for Updating Bagehot,” during the IMF/World Bank annual meetings in Washington on Oct. 8, 2016. Photo courtesy Reuters/Yuri Gripas

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