Private Equity Firms Focused Solely on Mezzanine Investing - December 2013

by Christopher Hardy

  • 02 Dec 2013
  • PE
  • PD

According to Preqin’s Fund Manager Profiles, there are currently 134 firms seeking to finance debt that incorporates equity-based options, such as warrants, with a lower-priority debt. These firms have raised an aggregate of just over $58bn of capital in the past decade and have combined estimated dry powder figure of $14bn.

A clear majority of the mezzanine-focused firms are headquartered in the US, with 69% of managers based in the country. This is a much larger percentage than firms based in the UK, which accounts for just 7% of the 134, but is the next largest percentage. Such US dominance in the strategy is also reflected in the sum of total funds raised in the last ten years and the estimated dry powder that these firms have at their disposal. The former stands at $39bn, representing 68% of the aggregate capital raised by mezzanine-focused firms in the last ten years. The latter totals just under $11bn, equivalent to 75% of the global total of estimated dry powder that mezzanine-focused firms have to invest. France accounts for the third largest proportion of firms with a mezzanine focus, representing 5% of the 134 firms managing to raise $5bn of capital in the last 10 years.

Eighty out of the 93 US-based firms focused solely on mezzanine investing only seek to invest in opportunities close to home in North America (including either the US or Canada). The remaining 13 firms have a wider geographic focus, mostly seeking investments in opportunities all around the globe, which can include specific areas of interest such as Asia or Western Europe.

By total capital raised in the last decade, the New York-based mezzanine firm Highbridge is the largest fund manager. The private equity firm has raised an aggregate total of $4.4bn in the last ten years and has just over $3bn of estimated dry powder. The firm closed their second mezzanine fund earlier this year $1.4bn above its original target.

The second largest mezzanine-only firm is Golub Capital with $3.4bn raised since 2003. The firm has a proportionally low estimated dry powder of $655mn, and is currently in market with the Golub Capital Partners VIII fund, which has held a fourth close on its way to its $500mn target.

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