WILMINGTON, Del. - DuPont Capital Management has closed its first private equity fund of funds, raising $240 million, just shy of its original target of $250 million, said Carmen Gigliotti, head of the private markets group.
The fund is using the same strategy the firm uses for the $2 billion private equity program of the $16 billion pension fund of E.I. du Pont de Nemours & Co. Inc., Wilmington, Mr. Gigliotti said. It is focusing primarily on middle-market buyout funds, but also will invest in mezzanine, venture capital and special situation funds, which could include distressed debt and energy funds.
Investors include the DuPont pension fund, the $720 million pension fund of State Street Corp., Boston; the $800 million pension fund of Macomb County Employees Retirement System, Mount Clemens, Mich.; and the $144 million pension fund of the New Bedford (Mass.) City Retirement System.
Four middle-market funds
Mr. Gigliotti said that so far the fund of funds has committed $56 million to four middle-market buyout funds, including American Security Partners III, Kohlberg Investors IV, Sun Capital Partners II and Quad C Capital Partners.
The fund of funds has been structured to invest up to 60% in middle-market funds, including 15% in co-investments; up to 15% in direct investments with other partnerships; up to 15% in secondary funds; up to 15% in venture cap funds; and up to 10% in special situations, distressed or energy funds. It expects to invest in 15 funds and to complete its commitments by early 2003.
The strategy is distinctive, Mr. Gigliotti explained, because its focus on smaller companies, with market caps of $100 million to $500 million, provides investors a way to achieve excess returns.
Ultimately, the fund of funds will be quite substantial, Mr. Gigliotti noted, adding it could grow to as much as $800 million, because the DuPont pension fund can invest up to $600 million alongside the private equity fund.
DuPont Capital Management, the investment management arm of DuPont, has $20 billion under management.