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Hunter Point Capital has taken the rare step of tapping debt markets to return cash to its investors, as it and rival investment firms look for ways to appease clients that have been starved of profit distributions.
The group raised $425mn secured against its stakes in a handful of private investment firms, a complex deal that will give it the opportunity to send a dividend to investors in its $3.3bn flagship fund, according to a letter to investors seen by the Financial Times.
The deal underscores the lengths private investment firms are going to satisfy investors who have trillions of dollars locked up in buyout funds, as they wait for a rebound in the cash payouts they had grown accustomed to but which dried up as dealmaking slowed in 2022 and 2023.
In recent months as debt markets have boomed, private equity groups have turned to bond and loan markets to issue dividends to themselves, heaping that debt on to portfolio companies to return capital to their investors.
Hunter Point’s chief financial officer David Prael wrote in the letter: “While we had expected to pursue a financing and ‘dividend recap’ when the portfolio was further developed, the market provided a window of opportunity on which to capitalise.”
The capital raise for Hunter Point, led by bankers at Goldman Sachs and Wells Fargo, turned to a relatively novel structure backed by the cash flows of its investments in other managers. That includes its stakes in buyout firm L Catterton, secondary investor Coller Capital, and real estate and credit investment shop Pretium Partners.
Hunter Point, Goldman Sachs and Wells declined to comment.
Investment managers in this small corner of the market have used these securitisations to return money to their fund’s backers, given the stakes in buyout groups are often only cashed out when firms go public or are sold.
Hunter Point was founded in 2020 by former top Blackstone executive Bennett Goodman and JC Flowers and Goldman Sachs alum Avi Kalichstein. Their business is focused on acquiring stakes in other private investment firms, a strategy that has attracted a swell of capital given the relatively stable management fees those businesses generate.