Exclusive: Warburg tops $5 billion mark for fund: sources

NEW YORK Thu May 10, 2012 3:55pm EDT

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NEW YORK (Reuters) - Warburg Pincus LLC has raised more than $5 billion in just over seven months for its 11th global private equity fund, a major step on the way toward its $12 billion target, people familiar with the matter said on Thursday.

Warburg Pincus Private Equity XI is the second-largest buyout fund globally by capital targeted that is currently tapping investors for money, behind Blackstone Real Estate Partners VII, which is targeting $13 billion.

Mega-buyout funds have struggled with a tough fundraising environment as their returns have been hit by tighter financing conditions. But Warburg markets its offering differently, focused on growth investing rather than the usual financial engineering by leveraged buyouts.

About 50 investors, both existing and new, participated in the first fundraising close, which marked the securing of the commitments and took place in early May, the sources said. They included public and corporate pension funds, endowments and sovereign wealth funds.

The firm has identified opportunities to put some of the capital to work immediately, they added.

Warburg Pincus declined to comment.

The fundraising environment remains tough for private equity, with 23 funds raising an aggregate $18.5 billion in the first quarter of 2012 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.

Warburg is offering investors a headline management fee of 1.4 percent and carried interest - the share of fund profits that go to the firm - of 20 percent, the sources said. Big investors may be charged a 1.3 percent management fee.

In March, the New Jersey Division of Investment said it would be charged a 1.3 percent management fee in its commitment period for a $300 million allocation to Warburg Pincus Private Equity XI and that no hurdle rate - a term used for a returns threshold - would be applied on how the 20 percent carry is charged.

In December, another public pension fund manager and one of the largest investors in the latest three Warburg Pincus funds, Washington State Investment Board, committed up to $750 million to Warburg Pincus Private Equity XI.

Warburg Pincus, which has more than $30 billion in assets under management, raised $15 billion for its previous fund, Warburg Pincus Private Equity X, which also had a $12 billion target.

Warburg Pincus Private Equity X was ranked second quartile in terms of returns and valuation as of the end of December according to VentureXpert, a Thomson Reuters market research firm that scores all private equity and venture capital funds. The fund was launched in 2007 but the average age of its investments is just two years.

Its three predecessors, the $8 billion Warburg Pincus Private Equity IX, the $5.3 billion Warburg Pincus Private Equity VIII and the $2.5 billion Warburg Pincus International Partners, are ranked as first quartile both on returns and valuation.

Warburg's past and current profitable investments include software company BEA Systems, European pharma company Zentiva, Indian telecom firm Bharti Telecom, Canadian oil sands company Meg Energy Corp, Chinese department store Intime and Dutch cable company Ziggo NV.

Blackstone Group LP said last month its latest real estate fund had raised about $10 billion. Apax Partners LLP is in the middle of raising a new 9 billion euro ($11.7 billion) buyout fund while Carlyle Group LP kicked off fundraising for its latest $10 billion buyout fund earlier this year, according to Preqin.

(Reporting by Greg Roumeliotis and Paritosh Bansal in New York; Editing by Jeffrey Benkoe, John Wallace, Tim Dobbyn and Phil Berlowitz)

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