UPDATE 2-Warburg Pincus raises $11.2 bln private equity fund

Fri May 10, 2013 1:51pm EDT

By Greg Roumeliotis and Soyoung Kim

NEW YORK May 10 (Reuters) - Warburg Pincus LLC has secured $11.2 billion for its latest global fund, one of the largest private equity funds raised since the financial crisis, underscoring investor demand for high-return offerings at a time of record-low interest rates.

Private equity firms moderated their fundraising expectations following the crisis, launching funds that in general were smaller than their predecessors. Warburg's previous fund, which had a $12 billion fundraising target, ended up raising $15 billion in 2007.

Warburg's latest fund also had a $12 billion target. While it fell short of that, it is still larger than other mega private equity funds raised in the last six months, including Silver Lake LP's $10.3 billion fund and Advent International Corp's 8.5 billion euro ($11.1 billion) fund.

Last year, Blackstone Group LP raised the largest private equity fund since the financial crisis, amassing $16 billion after four years of fundraising. It also raised a $13.3 billion private real estate fund.

For most private equity funds, fundraising remains challenging due to fierce competition. In the first quarter, 129 private equity funds reached a final fundraising close like Warburg, raising a total of $67 billion, compared with 203 funds that raised $79 billion in the first quarter of 2012, according to market research firm Preqin.

Sentiment, however, appears to be improving as institutional investors, particularly pension funds with huge liabilities, look for outsized returns that exceed the broader market. Carlyle Group LP co-founder David Rubenstein said on Thursday that the firm could exceed its $10 billion fundraising target for its latest flagship U.S. buyout fund.

New York-based Warburg Pincus said on Friday that investors in the new fund, Warburg Pincus Private Equity XI, include public and private pension funds, sovereign wealth funds and wealthy individuals, with a significant number of the new investors coming from outside the United States.

The firm reached a final close of the fund within one year of closing the fund's first part, in line with its initial plan, it added.

"This successful fundraise, in a challenging environment, was driven by strong support from both existing and new investors," Warburg Pincus co-President Charles Kaye said in the statement.

Warburg's predecessor fund, Warburg Pincus Private Equity X, was valued at 1.2 times its investors' money and had a net internal rate of return of 5.5 percent as of the end of September 2012, according to one of its investors, the Washington State Investment Board.

The predecessor of that fund, the $8 billion Warburg Pincus Private Equity IX, which was raised in 2005, was doing better, valued at 1.6 times its investors' money and reporting a net internal rate of return of 10.4 percent, the Washington State Investment Board added.

Warburg Pincus Private Equity XI asked for fees to manage investors' money of between 1.3 percent and 1 percent, according to another investor, the New Jersey Division of Investment. As customary in private equity, it will also take 20 percent of investment profits in the form of the so-called carried interest.

The fund will invest in a range of companies, from venture capital startups to later-stage growth capital and leveraged buyout opportunities, in sectors that include energy, financial services, healthcare, technology, media and telecommunications, and consumer, industrial and services.

Founded in 1966, Warburg Pincus has more than $40 billion in assets under management and a portfolio of more than 125 companies. The firm and its fund managers committed to invest more than $300 million of their own money into the latest fund.

Warburg's current and past investments include U.S. retailer Neiman Marcus, European pharma company Zentiva, Indian telecom firm Bharti Telecom, Canadian oil sands company Meg Energy Corp, Chinese department store Intime 1833.HK and Dutch cable company Ziggo NV.

Antero Resources, an oil and natural gas company controlled by Warburg, is preparing for an initial public offering that could value it at as much as $10 billion, three people familiar told Reuters this week.