Investcorp hits the road with £1bn fund

The Bahrain-based manager has begun marketing its first traditional limited partnership and is targeting a first close on $400m in May, according to one investor.

Investcorp, the Bahrain-based alternative assets manager, has begun fundraising for its first conventional limited partnership, a $1 billion co-investment fund targeting US and European investors.

Citigroup, which is advising the firm, sent out the private placement memorandum last week, according to one recipient. The US bank’s placement team is touting an internal rate of return for Investcorp’s 22 deals of 40 percent, since the group unified its investment teams in 2001.

To date Investcorp has raised capital for its transactions on a deal by deal basis from wealthy individuals in the Gulf. With its latest offering Investcorp is hoping to capitalise on the booming appetite for the asset class by making its dealflow available to conventional institutional investors.

In the second half of last year it raised $527 million (€406 million) from investors, the firm said as it reported its interim results, 66 percent more than in the same period in 2005.

The new fund, which is aiming for a first close in May, will invest alongside its traditional high net worth investor base, taking a 30 percent stake in any deal. Of the remaining 70 percent, Investorcorp will syndicate the majority, retaining about 7 percent on its balance sheet and 7 percent for partners.

Sal.Oppenheim, a private German bank, has committed $75 million and Northwestern Mutual, a US insurance group, a further $50 million, according to an investor.

Investcorp is also looking to raise its first pool of capital to target deals in the Gulf region. It is targeting $500 million, which will be managed by a completely separate team. Historically, Investcorp has pursued its mid-market strategy in the US and Europe.

Its private equity division has enjoyed mixed fortunes recently. It made ten times its money on its investment in Apcoa, a German car parking company, after the business attracted several first round bids of more than €700 million ($908 million). However, it is expected to lose about £250 million from the restructuring of Polestar, a European printing company.

Investcorp declined to comment.