A handful of wealthy individuals in India could soon be counted as limited partners in The Blackstone Group LP’s Blackstone Capital Partners V (BCP V) fund, which closed its corpus at $21.7 billion (about Rs88,188 crore) last week after a final round of fund-raising.
Merrill Lynch Alternative Investments, which tied up with Blackstone to form ML-BCP V (Offshore) LP or the ML Fund for investing in BCP V, offered high networth individuals in India the option to invest in the ML Fund.
Such individuals were required to invest a minimum of $250,000. A Blackstone spokesperson declined to comment on the issue.
The offer, according to a Merrill Lynch document pitching the investment, closed 31 July (it opened in May with an option to extend till 30 September). The decision to keep minimum investments at $250,000 is a departure given that $15 million is the minimum that is typically demanded by Blackstone for direct participation.
Blackstone’s goal was to raise an additional $5.75 billion for BCP V to make the total fund $20 billion and it exceeded that target.
Blackstone has raised five funds prior to BCP V, including one fund focused on communications and media. Across the funds, the net internal return of rate ranged from 14% to 55%.
The firm started raising funds for BCP V in 2004 and had an original target corpus of $10-12 million.
At $21.7 billion, it is the largest private equity fund ever raised and tops Goldman Sachs Group Inc.’s $20 billion fund raised this April.
For the final round of fund-raising, the tie-up with Merrill Lynch gave Blackstone access to the right investors. But the investors had to meet a certain profile.
They could not be American. They had to be individuals or family companies with more than $5 million in investments or institutions with more than $25 million in investments. The investor’s liquid net worth had to be a minimum of 10 times the investment in the fund, not including residence, furniture or cars. According to the World Wealth Report released by Cap Gemini and Merrill Lynch in June, India had more than 100,015 high networth individuals in 2006.
The study defined high networth individuals as people with net assets of at least $1 million. Institutions and wealthy individuals that invest in private equity funds are called limited partners.
Merrill Lynch has been offering this type of product to their high networth segment for a number of years, and UBS AG may also have been doing the same.
While the Blackstone fund focuses on buyouts of large-cap companies in the USand Western Europe, Blackstone’s India foray was also used as a selling point to potential investors.
The Merrill Lynch document noted that Blackstone has been exploring opportunities in Asia, focusing on Japan, China and India. It said Blackstone employs almost 400 employees across business lines worldwide, which go beyond private equity to include corporate advisory, debt investing, mutual funds and hedge funds.
Of that group, eight were working in private equity out of Mumbai and one in China as of mid-April. The document also said that Blackstone is exploring options for starting outsourcing operations for its portfolio companies in India.
The environment will continue to be ripe for more private equity investments, particularly large-cap buyouts, according to the fund document, given the strong performance of the global economy.
Many large public companies have gone private with private equity, for many reasons including the burden of complying with regulations, namely Sarbanes-Oxley in the US. Blackstone has seen large-cap buyouts rise from less than 20% of transactions to more than 80% in the last year.