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The US private equity group Warburg Pincus has raised $17.3bn for the largest fund in its 57-year history, joining a handful of peers in that have beat their targets as others struggle to bring in cash.
The firm began soliciting investments for the new fund about two years ago with a $16bn target. The fund will focus on Warburg’s core business of corporate buyouts and equity stakes in companies, aiming to make between 75 and 90 investments averaging about $175mn apiece.
Unlike some rivals, privately held Warburg has not dramatically increased the sizes of its funds and has largely avoided, in recent years, moving into new business lines such as credit in order to rapidly expand assets under management.
That strategy has meant that firms that were close to Warburg’s size 15 years ago, such as Blackstone Group, have grown more than 10 times as large by assets.
Warburg also remained focused on private equity investments, spreading them among dozens of smaller deals in various sectors and locations around the world.
Warburg chief executive Chip Kaye said the group’s measured approach had appealed to investors, citing its plans to “remain disciplined about investment pacing”. Timothy Geithner, its chair, has said there currently is a “premium on diversification”.
Alongside Warburg, a group of older private equity managers such as Clayton, Dubilier & Rice, CVC Capital Partners, TA Associates and GTCR have all recently closed large funds above their targets. Several larger firms, including the listed Apollo Global Management, Carlyle Group and Blackstone, have warned they expect to miss initial fundraising targets for their flagship buyout funds.
Kaye has warned previously that geopolitical friction had complicated the investment outlook and trends of deglobalisation would lead to entrenched inflation. He also said that Warburg had missed out on some deals in 2020 and 2021 as buoyant equity markets drove up their price.
“We were very mindful of trying to lean against the incrementalism, momentum and relativism that creeps in,” Kaye told the Financial Times last year.
In recent years, Warburg has focused on returning cash to investors. This year, it has struck deals to sell $9.3bn in investments versus making $6.7bn in new commitments, people familiar with the matter said. Warburg declined to comment on its asset sales.
Despite its successful conclusion, Warburg’s latest fundraising effort encountered challenges. After the fund’s launch in 2021, interest rates quickly rose, stock markets plunged and some investors pulled back from allocating more cash to private equity.
The difficult environment meant Warburg had to ask investors for one fundraising extension, according to a person familiar with the matter, a sign that the process took longer than expected.
The composition of Warburg’s top team also changed, something that does not typically happen during a fundraising. In July, Warburg named Jeffrey Perlman as its next president to replace Geithner, a former US Treasury secretary in the Obama administration, who became chair.
Geithner’s change in title was considered more fitting for his role inside the firm where he offers macroeconomic insights to dealmakers and outside investors and votes on its investment committee, people close to Warburg told the FT. Warburg plans for Perlman to eventually succeed Kaye as chief executive as part of a broader generational transfer in which top dealmakers are promoted in future years, said the people.
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