NEW YORK (Reuters) - Bain Capital LLC aims to raise $6 billion for its new global private equity fund and will offer three options on fees it charges to manage the money, according to people familiar with the matter.
At a time when Bain's former boss and co-founder, Republican presidential hopeful Mitt Romney, is asking Americans for their vote, the private equity firm will be asking for money from the nation's pension funds and endowments as well as institutional investors across the globe. Romney's political opponents have criticized his record at Bain.
But the Boston-based firm says it has created hundreds of thousands of jobs in its 28-year history and supported hundreds of charities.
Bain investors contacted by Reuters in March, including some of the largest U.S. public pension funds, said political attacks made no difference in their assessment of Bain and that their focus was on returns and the fees being charged.
Bain can also point to recent investor trust. It has told investors that its second Asian fund will be wrapping up fundraising this week, having reached its target of $2 billion.
Bain is preparing to kick off fundraising for its new fund, Bain Capital Fund XI, by the end of June, sending out a private placement memorandum with the final terms, the sources said. Fund X, the firm's previous global fund, was $10.7 billion.
Bain Capital Fund XI will also receive a $600 million commitment from the firm's fund managers to demonstrate alignment of interest, the sources said.
A fundraising close, marking the securing of commitments from investors, could come as early as the first quarter of 2013, the sources said.
Bain has told investors that a $2 billion co-investment fund will be raised alongside Fund XI, and that access as well as terms that investors get on that fund will be tied to the size of their commitment to the core fund, the sources said.Bain declined to comment.
FUNDRAISING
The firm, which boasts about $60 billion in assets under management, has decided on a modest fundraising target for Fund XI, seeking about 44 percent less than its previous fund. Sources told Reuters in April the firm was considering raising between $6 billion and $8 billion.
The fundraising environment remains tough for private equity, with 23 funds raising an aggregate $18.5 billion in the first quarter and taking an average of 20.9 months to fundraise, topping the previous average high of 20.4 months for funds closing in 2010, according to market research firm Preqin.
Bain has told investors the lower fundraising target relates to opportunities in the market, the sources said. The money per deal the firm will likely have to cough up as equity is now between $200 million and $500 million, Bain has told investors, as financing conditions still remain challenging for mega-deals.
Should an attractive opportunity come up that requires an equity check in the range of $1 billion, such as Bain's investment in Japanese restaurant chain Skylark Co Ltd, the firm could rely on its co-investment fund to chip in, it has told investors.
Bain's new fund is at the low end of the major buyout funds by capital targeted. Warburg Pincus LLC is raising a $12 billion fund, while KKR & Co LP and Carlyle Group LP are each raising $10 billion funds.
FEES Private equity firms have historically used the 2/20 fee structure -- charging a 2 percent fee to manage the assets and 20 percent carried interest, or the private equity firm's cut of investment profits.
The carried interest kicks in once the profits reach a preferred rate of return. But Bain has told investors they will have different options.
The one seen by investors as more conventional will be based on a 1.5/20 fee structure with a 7 percent preferred return rate, the sources said.
A second option will be a 1/30 fee structure, geared toward making fund manager remuneration more performance-based, with the preferred rate of return set again at 7 percent, they said. Under such a structure, higher investment gains would pay more carried interest.
The third option, advertised by Bain as the ultimate alignment of interest with investors, will be based on a 0.5/30 fee structure with no preferred rate of return, the private equity firm told investors.
Bain's move to consider different fee structures comes as it tries to diversify its limited partners beyond endowments, foundations and wealthy families, which together constitute about 65 percent of its pool of investors.
The firm hopes that giving investors options on fees will help it attract more pension funds and sovereign wealth funds, some of which are wary of overpaying for management fees.
The idea to experiment with the fee structure was inspired by Bain's success in offering two fee options for its second Asian fund.
Bain offered investors the option of either a 2 percent management fee and a 20 percent carried interest with a 7 percent hurdle rate, or 1 percent management fee and 30 percent carried interest with a 10 percent hurdle rate.
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At a time when Bain's former boss and co-founder, Republican presidential hopeful Mitt Romney, is asking Americans for their vote, the private equity firm will be asking for money from the nation's pension funds and endowments as well as institutional investors across the globe. Romney's political opponents have criticized his record at Bain.
But the Boston-based firm says it has created hundreds of thousands of jobs in its 28-year history and supported hundreds of charities.
Bain investors contacted by Reuters in March, including some of the largest U.S. public pension funds, said political attacks made no difference in their assessment of Bain and that their focus was on returns and the fees being charged.
Bain can also point to recent investor trust. It has told investors that its second Asian fund will be wrapping up fundraising this week, having reached its target of $2 billion.
Bain is preparing to kick off fundraising for its new fund, Bain Capital Fund XI, by the end of June, sending out a private placement memorandum with the final terms, the sources said. Fund X, the firm's previous global fund, was $10.7 billion.
Bain Capital Fund XI will also receive a $600 million commitment from the firm's fund managers to demonstrate alignment of interest, the sources said.
A fundraising close, marking the securing of commitments from investors, could come as early as the first quarter of 2013, the sources said.
Bain has told investors that a $2 billion co-investment fund will be raised alongside Fund XI, and that access as well as terms that investors get on that fund will be tied to the size of their commitment to the core fund, the sources said.Bain declined to comment.
FUNDRAISING
The firm, which boasts about $60 billion in assets under management, has decided on a modest fundraising target for Fund XI, seeking about 44 percent less than its previous fund. Sources told Reuters in April the firm was considering raising between $6 billion and $8 billion.
The fundraising environment remains tough for private equity, with 23 funds raising an aggregate $18.5 billion in the first quarter and taking an average of 20.9 months to fundraise, topping the previous average high of 20.4 months for funds closing in 2010, according to market research firm Preqin.
Bain has told investors the lower fundraising target relates to opportunities in the market, the sources said. The money per deal the firm will likely have to cough up as equity is now between $200 million and $500 million, Bain has told investors, as financing conditions still remain challenging for mega-deals.
Should an attractive opportunity come up that requires an equity check in the range of $1 billion, such as Bain's investment in Japanese restaurant chain Skylark Co Ltd, the firm could rely on its co-investment fund to chip in, it has told investors.
Bain's new fund is at the low end of the major buyout funds by capital targeted. Warburg Pincus LLC is raising a $12 billion fund, while KKR & Co LP and Carlyle Group LP are each raising $10 billion funds.
FEES Private equity firms have historically used the 2/20 fee structure -- charging a 2 percent fee to manage the assets and 20 percent carried interest, or the private equity firm's cut of investment profits.
The carried interest kicks in once the profits reach a preferred rate of return. But Bain has told investors they will have different options.
The one seen by investors as more conventional will be based on a 1.5/20 fee structure with a 7 percent preferred return rate, the sources said.
A second option will be a 1/30 fee structure, geared toward making fund manager remuneration more performance-based, with the preferred rate of return set again at 7 percent, they said. Under such a structure, higher investment gains would pay more carried interest.
The third option, advertised by Bain as the ultimate alignment of interest with investors, will be based on a 0.5/30 fee structure with no preferred rate of return, the private equity firm told investors.
Bain's move to consider different fee structures comes as it tries to diversify its limited partners beyond endowments, foundations and wealthy families, which together constitute about 65 percent of its pool of investors.
The firm hopes that giving investors options on fees will help it attract more pension funds and sovereign wealth funds, some of which are wary of overpaying for management fees.
The idea to experiment with the fee structure was inspired by Bain's success in offering two fee options for its second Asian fund.
Bain offered investors the option of either a 2 percent management fee and a 20 percent carried interest with a 7 percent hurdle rate, or 1 percent management fee and 30 percent carried interest with a 10 percent hurdle rate.
yahoo.com
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