Terra Firma Capital Partners’ plan to raise a new $3.4 billion buyout vehicle appears to be facing headwinds, with potential investors insisting that the fund must have no more than 15% exposure to any one investment and cannot invest across multiple funds, per the Financial Times.

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The investors' caveats are attributed to the Guy Hands-led group's ill-timed £4 billion acquisition of record label EMI and subsequent £1.5 billion lawsuit against Citigroup, which Hands later abandoned. From the outside, these requests may look like a prudent call and another example of LPs' changing role in private equity.

Guy Hands (left) and Justin King However, it might not be just the investors seeking those limitations: The reported restrictions already exist and were proposed by Terra Firma itself, as part of a case study on the failed EMI investment.

The buyout firm has undergone a transformation over the last two years. It hired former Sainsbury's chief executive Justin King as head of portfolio businesses in 2015 and Lloyds Banking Group veteran Andrew Géczy as its CEO last year. Its current portfolio includes nursing home operator Four Seasons Health Care and property manager Annington Homes, the latter of which underwent a refinancing of around £4 billion just last month.

What may also work in Hands' favour is that the planned fundraising appears to be well-timed, due to the current buoyant investment climate. In total, 67 buyout funds closed last year in Europe, per the PitchBook Platform, raising nearly €63 billion altogether—up 12% and 40% respectively on 2015.

The trend is continuing this year with Apollo Global Management raising $23.5 billion for its latest vehicle, making it the largest buyout fund ever, while CVC Capital Partners raised the largest Europe-based fund in history, closing on €15.5 billion in June.

Article by Eric Burg, PitchBook