Brown Brothers Harriman & Co. has raised a second incarnation of the 1818 Fund L.P., a private equity limited partnership fund, attracting pension money for the first time.
Forty percent of the $475 million raised was from pension funds including the California Public Employees' Retirement System, Sacramento, the largest investor with a $75 million commitment.
Other pension money came from the Massachusetts Pension Reserves Investment Management Board, Boston; the World Bank pension fund, Washington; and the private equity fund of funds managed by Chancellor Capital Management, New York.
This is the fund's second close; the first was in August.
The first fund, hailed as a relationship investing fund because of its strategy of taking board seats and investing friendly long-term private equity capital to finance expansions, has $325 million with more than 80% from financial institutions. None of the money is from tax-exempt funds.
"Three new categories of investor account for roughly half" of the second fund's assets, said Michael Long, partner, referring to public and private pension funds and private investors.
The second fund will follow the same strategy as the first, with investments mainly in midsized public companies with market capitalizations of $200 million to $1 billion. The fund will own 10% to 25% of a company on a fully diluted basis. In many cases it will be a company's largest stockholder.
Investments likely will take the form of convertible preferred stock or notes, common stock or warrants.
The first fund has returned more than 30%, on a compound-annualized basis, since its inception in January 1990 through Sept. 30, according to Larry Tucker, partner.