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By Anjuli Davies
LONDON (Reuters) - Private equity firm Permira has told investors it has only raised 2.2 billion euros ($2.9 billion) in the first tranche of its latest fund, Permira V, half the amount of an already scaled back target.
Fundraising by private equity firms, which aim to buy into businesses with a view to selling them on at a profit after an overhaul, remains a challenge in a weak economic climate and patchy returns have made investors more selective.
The buyout find, whose investments include German fashion designer Hugo Boss <BOSSn.DE>, had originally hoped to raise 6.5 billion euros when it announced fundraising plans in September 2011 for its fifth fund, but then scaled back that target to between 4 and 5 billion euros in January this year.
"We are happy with the strong backing we have received from existing and new investors in the Permira V first closing, giving us a good platform for the rest of the fundraising," Kurt Björklund and Tom Lister, co-managing partners of Permira, said in letter to investors this week.
"The new fund will start sourcing opportunities immediately," they said.
'First closing' means a private equity firm has asked clients to release money they promised so that it can start investing, while still looking to further increase the size of the fund.
In 2006, at the height of the buyout boom, Permira raised 11.1 billon euros, in what was then the biggest European buyout fund, though it was later scaled back to some 9.6 billion euros.
Private equity funds in Europe raised nearly $52 billion in 2012, according to Thomson Reuters data, compared with an annual average above $100 billion during the 2006-08 boom.
Permira's partners have committed 200 million euros to the new fund which, if the final 4 to 5 billion-euro target is met, would be much higher than the 2 percent partners have committed in the past.
Commitments of 200 million euros have also been made on condition that additional funds are raised within the 12-month deadline for the final close.
London-listed SVG capital <SVI.L>, one of its cornerstone backers, has committed 100 million euros to the new Permira fund, SVG said on Thursday.
Separately, Permira has told investors that the value of its portfolio across all its funds has risen 8 percent in the first quarter of the year.
Its fourth fund, which had seen heavy valuation writedowns in the wake of the credit crisis, has risen 34 percent in value since its launch in 2006. Britain's FTSE 100 <.FTSE> share index is up 8.9 percent on its September, 2006 levels.
(Editing by Greg Mahlich)