The private equity group behind the takeovers of Formula One motor racing, Samsonite suitcases and Breitling luxury watches has set a new European fundraising record as investors scramble to put money into leveraged buyouts.
CVC Capital Partners, which is based in Luxembourg but has offices in European hubs including London, comfortably raised €16bn after being swamped with demand of between €25bn and €30bn from investors.
This is the largest fundraising for a European group in the continent.
The fund had a hard cap of €15.5bn, and reached €16bn after the fund manager added its own money of between 3 to 5 per cent of the total fund, according to two people familiar with the move.
Pension funds and other institutional investors are pouring vast sums of money into the best-performing private equity funds.
They are attracted by the way the top-performing funds in the sector have beaten most other asset classes, including hedge funds.
The record fundraising by CVC takes the total it has raised to almost $107bn since its creation in 1981 as an offshoot of Citigroup.
Since then it has stolen a march on its main rivals to become the dominant force in the European private equity industry by consistently generating double-digit returns by cashing in stakes in companies including Saga, the over-50s insurer and travel agent, and Sunrise, the Swiss telecoms operator.
Because of its size, CVC’s fund has seen new entries from new geographies, including established investors from North America, Europe, the Middle East and Asia, a person familiar with the process said.
Existing investors, which include large pension funds and sovereign wealth funds, have “materially increased” their commitment, the person added.
As a result of high demand, CVC tightened the terms offered to investors by cutting the hurdle rate for its fees and scrapping early-bird discounts.
Still, investors are keen to invest in CVC, “perceived to be the best buyout manager in Europe,” a seasoned fundraiser in the UK said.
On average, net returns, after costs, are 20 per cent per year for all CVC funds, according to data seen by the Financial Times.
“We are incredibly grateful to the investors for their support,” said Steve Koltes, CVC’s co-chairman.
CVC is expected to invest between €3bn and €4bn of equity each year in an investment strategy that mirrors previous funds: a focus on individual companies rather than the industry or country they operate in. The latest fund will invest over a five-year period and out of 14 separate countries in Europe.
Sectors could include financial services, technology, media and telecommunications and healthcare based on its record, a person said.
CVC has already spent close to 80 per cent from its previous fund, raised in 2013. It expects to make the first acquisition with the new fund no later than the start of next year, a person familiar with the investment strategy said.
However, investors have expressed their concerns about the size of large funds and managers’ ability to spend wisely.
“Investors are concerned that fund sizes are going back to large levels and valuations are pretty rich at the moment,” said an industry veteran.
But in an interview, Mr Koltes said that CVC had remained disciplined in its investment style. He said: “We’ve consistently invested €3bn each year and we’ve been very disciplined [investors].”
However, he shared concerns about assets being too high.
He said: “At CVC, we worry about everything and this focus on the downside enables us to generate consistent returns across economic cycles.
“The issue is always whether prices are ahead of value and whether people are mis-pricing assets because of the markets giving them a false sense of security.”
Asked if Brexit would have any impact on how the new fund invests in the UK, he said that the fund would remain “active” there but “we’re not reliant on any one country or any one sector or any one person”.
Fundraising has been buoyant for private equity and other managers have also benefited. A report by Invest Europe showed that private equity fundraising hit its highest level since 2008 last year at €74.5bn, a 37 per cent year-on-year rise.