Altas Partners Raises $1 Billion for Longer-Life Private Equity Fund


May 2, 2016 — Chris Cumming , Wall Street Journal

Fund can hold investments much longer than the industry standard

Altas Partners, a four-year-old private equity firm based in Toronto, has raised $1 billion for a fund that can hold investments much longer than the industry standard.

Altas is the first of several firms pitching long-lived vehicles to wrap up its fund as the private-equity industry begins to experiment with breaking standard investment time limits. Some of the world’s largest firms, including Blackstone Group and Carlyle Group, also are raising vehicles that exceed the typical five-year hold period for individual investments and 10-year fund life.

But Altas Partners, founded in 2012 by former Onex Corp. executive Andrew Sheiner, has beaten them to the finish line. The firm closed its debut vehicle in about a year and exceeded the initial $600 million goal to hit the fund’s upper limit, also referred to as the hard cap. Altas Partners Holdings LP closed on April 30 and was raised with the help of placement agent Park Hill Group LLC.

Altas’s fund is unusual in three ways. It gives the firm the option to own each company it invests in for up to 17 years, charges management fees on the money it has actually invested rather than the entire pool it raised and concentrates an unusually large share of the fund’s capital in each deal.

The desire to start a fund like this led Mr. Sheiner to strike out on his own after a 17-year career with the Toronto-based Onex. Onex’s investment in Sky Chefs, which it held for 15 years and built into the largest airline caterer in the world, is a model for the type of long-term investment he hopes to make, he said.

“With some businesses under the traditional private-equity model, there is pressure to sell before it’s time,” Mr. Sheiner said. “Great businesses are hard to find, and if you’re fortunate enough to own one, it’s tragic to have to sell for structural reasons.”

Although relatively new, longer-term funds are finding traction with institutional investors. Blackstone Group’s long-life fund collected $670 million in the first quarter, and the firm expects it to exceed its $5 billion target. Carlyle has raised around $3 billion for a 20-year fund and may collect more, Co-Chief Executive David Rubenstein said on a recent earnings call.

Altas’s strategy differs from those of its larger peers. While Blackstone has said it wants to make safer, lower-return investments that it will hold for a long time, Altas will aim for typical private-equity returns and isn’t specifically pursuing long-term deals. It may sell some companies within just a few years but has the flexibility to hold them as long as necessary, Mr. Sheiner said.

The approach is designed in part to appeal to business owners and managers. Sponsor-to-sponsor deals, when one private-equity firm sells a business to another, make up a steadily increasing percentage of private-equity exits, and some business owners are eager to get off the treadmill, Mr. Sheiner said.

“So many [businesses] are on their second or third private-equity owner that the notion of having a more stable, longer-term capital partner is really appealing to them,” he said.

With a longer investment horizon, Altas will invest deliberately, making three to five investments total from the new fund. It hopes to deploy $150 million to $500 million at a time in one or two deals a year, Mr. Sheiner said.

Altas already has invested in deals totaling about $1 billion of invested capital, relying partly on capital raised before launching its fund. The firm funded at least part of its most recent deal, Capital Vision Services, a Virginia-based optometry practices management platform, out of the new fund. Previously, it invested in St. George’s University, a medical school in Grenada, and NSC Minerals, a Canadian company that makes salt for deicing roads.