For years private equity has been fixated on raising ever larger funds in an ongoing show of oneupmanship, but this is not what LPs want, says Orlando Management partner Henrik Fastrich.
The boss of the German turnaround firm, which recently beat a €200m target to reach €231m for its third fund, stresses the importance of pooling sensible amounts of capital.
“You have to raise a fund that your LPs know you can invest,” he told Real Deals. “No LPs are happy if you raise a huge fund, take a management fee and don't invest all of that money.”
Taking a disciplined approach to fundraising is more likely to pay off in the long run, believes Fastrich.
Orlando has a prudent history: its debut raised €163m in 2002, followed up in 2006 with a €255m vehicle that was targeting €200m.
The turnaround investor says that if funds are spent faster than expected then it is simply a case of returning to market earlier than the typical five years.
“For us it's not an exercise of spending a further two years just getting to a final close. We would rather keep the fund at a size and volume that matches the needs of the transaction volume in the market,” he added.
Orlando Management was interviewed for our Real Deals Intelligence service. Intelligence is a comprehensive, analytical and insightful snapshot of every firm in the European private equity industry, tracking portfolios, fundraising activity, strategy, personnel movements and daily developments. The service is available to our subscribers and accessible here.