Warburg preps next flagship as race for megafunds heats up

The race among private equity megafunds is on this year.

Warburg Pincus is gearing up to raise its next flagship fund targeting $13.5 billion, sources with knowledge of the situation said.

The firm joins others like TPG, Carlyle Group, Hellman & Friedman and Vista Equity Partners in raising large pools this year. Fundraising has been strong over the past few years, led by the largest funds in the market, and 2018 looks to be no different.

Warburg is not officially in the market with the pool, which technically is the 13th flagship. Warburg is not calling the vehicle Fund XIII because of superstition, one of the sources said. Instead, the fund is called Warburg Pincus Global Growth, sources said.

One source, an LP with knowledge of the firm, said the fund could raise up to $15 billion for the pool. Global Growth does not yet have a cap, sources said.

Private Equity International reported on the fund in January.

The new pool is expected to have a final close this year, sources said. Warburg in recent years has had strong fundraising processes, holding first-and-final closes within six months for its recent funds.

Warburg Pincus Private Equity XII closed on more than $12 billion in third-party commitments in 2015.

That fund, still early in its J-curve period, was generating a 4.17 percent net internal rate of return and a 1x multiple as of Sept. 30, 2017, performance information from Washington State Investment Board shows.

The firm closed its 11th fund on $11.2 billion in 2013. That pool was generating a 14.18 percent net IRR and a 1.5x multiple as of Sept. 30, 2017, WSIB said.

Big funds

Warburg is one of several megafunds in the market this year.

Other large funds are Carlyle Fund VII, targeting $15 billion; Vista Equity Partners, targeting at least as much as the prior fund, which closed on $11 billion in 2017; Hellman & Friedman, targeting as much as $16 billion for its ninth fund; and TPG, targeting $11 billion for its eighth flagship fund along with a companion healthcare-focused fund targeting $2.5 billion. In addition, EQT closed its eighth flagship fund on 10.75 billion euros ($13.29 billion) in February.

This follows last year’s efforts, when Apollo Global Management closed the largest-ever traditional buyout fund on $24.6 billion and Clayton Dubilier & Rice closed its 10th fund on $10 billion.

As of March 19, U.S.-based buyout and mezzanine funds raised $28.8 billion, ahead of last year’s pace by $2.3 billion, according to Buyouts’ research.

Action Item: Warburg’s Form ADV: https://bit.ly/2I0IkP1

Monster Yamaha Tech 3 rider Johann Zarco of France, Repsol Honda rider Marc Marquez of Spain and Movistar Yamaha rider Valentino Rossi of Italy compete at the Qatar Motorcycle Grand Prix, MotoGP race, in Losail, Qatar, on March 18, 2018. Photo courtesy Reuters/Ibraheem Al Omari