* Offering could reach up to $9 bln with co-investments
-sources
* Management fee offered could be as low as 0.5 pct -sources
* Asia Fund II within a few weeks of closing -source
(Repeats to additional subscribers)
By Greg Roumeliotis and Paritosh Bansal
NEW YORK, April 10 (Reuters) – Bain Capital LLC is
considering raising between $6 billion and $8 billion for a new
global buyout fund – lower than its last $10.7 billion fund –
and offering investors up to three options on fees it charges to
manage the money, according to people familiar with the matter.
Bain, once headed by Republican U.S. presidential candidate
Mitt Romney, may start fundraising as early as this summer for
its 11th global buyout fund, Fund XI, the sources said.
Taking co-investments into account – money coming from
investors through a supplemental fund to invest in deals – Bain
has told investors the offering could reach $8 billion to $9
billion, compared with the $12.7 billion for the tenth fund,
Fund X, they added.
Bain declined to comment.
A tougher fundraising environment for private equity funds
has prompted many managers to scale back their
multibillion-dollar offerings. It has also led to Bain toying
with its fee structure to attract more investors.
In 2011, private equity firms raised just $263 billion for
deals, less than half the $600 billion they pulled in at the
peak of the buyouts boom before the financial crisis of 2008.
This is because limited partners – pension funds, endowments
and other investors in these funds – have scaled back their
private equity investments. Moreover, a number of institutions
such as banks and insurers are pulling back from the market.
Private equity firms have historically used the 2-20 fee
structure, where they charge a 2 percent fee to manage the
assets and 20 percent of the profits from investments, also
known as carried interest. The carried interest kicks in once
the profits reach a certain rate of return, called the hurdle
rate.
Seeking feedback from investors, Bain has discussed charging
as little as 0.5 percent in management fees and applying a
hurdle return rate as low as zero for its eleventh buyout fund,
the sources said.
Bain may still ask for a 30 percent carried interest rate as
it targets investors willing to pay more for incentive
compensation in exchange for lower management fees.
ASIA FUND
The ideas have been inspired by Bain’s success of offering
two fees options for its second Asian fund – 2 percent
management fee and a 20 carried interest with a 7 percent hurdle
rate, or 1 percent management fee and 30 carried interest with a
10 percent hurdle rate, the people said.
The private equity group is close to reaching its $2 billion
fundraising target for its second Asian fund, with final
fundraising close expected within a few weeks, one source added.
The fundraising effort was boosted by the performance of
Bain Capital Asia Fund I, a $1 billion fund launched in 2007,
which is currently valued at about 1.4 times its cost, that
person added.
The fund has been boosted by deals such as the sale of
Feixiang Chemicals in China to specialty chemical producer
Rhodia, in which Bain made four times its money.
In the latest global buyout fund, Bain may offer as many as
three different fees options, the people said.
The firm has made no final decision on the target size of
Bain Capital Fund XI, its fee structure, the co-investment
component or the launch date for the fundraising, the people
said.
(Reporting by Greg Roumeliotis and Paritosh Bansal in New York;
Editing by Gerald E. McCormick and Matthew Lewis)
