Clayton, Dubilier & Rice is closing in on $23bn for its new flagship buyout fund, becoming the latest big-name investor to defy an industry-wide fundraising slump.

The US buyout firm asked its investors last week if it could raise the fund’s so-called hard cap from $23bn to $23.5bn, according to people familiar with the matter, in a sign of its confidence in raising significantly more than its original $20bn target.

The rare move to raise the fund’s upper limit comes as the private equity sector grapples with one of the most difficult fundraising markets in history and at a time when many industry executives are predicting a decline in returns. 

CD&R declined to comment.

Private equity firms raised $517bn worldwide in the first half of 2023, according to a Bain & Co report released in July, a 35 per cent decline against the same period a year ago

The drop in fundraising comes against a backdrop of a slump in dealmaking amid rising interest rates and the prospect of lower economic growth. 

Apollo’s Marc Rowan said last week that buyout firms had reached the “end of an era”, echoing comments made by a leading executive at Singaporean sovereign wealth fund GIC who said the “golden age” of private equity was over, citing the likely impact of higher interest rates on returns. 

The market environment is prompting many firms, including CD&R, to offer incentives to larger investors in an effort to boost fundraising. Such sweeteners include so-called co-investments, which often allow investors to participate in deals without having to pay management fees. 

The difficult market has not stopped some of the largest private equity firms successfully raising huge sums. CVC Capital Partners, known for its big bets on sport, last month gathered €26bn for the largest ever buyout fund, while TA Associates this year closed a $16.5bn fund.

However, some of their peers have struggled, with Apollo quietly closing its latest flagship effort on $20bn, below its initial target.

Founded in 1978, CD&R is one of the industry’s oldest firms. Unlike peers including KKR and Blackstone, it has not pushed into other areas such as credit, real estate and infrastructure, choosing instead to focus on leveraged buyouts. 

The firm is best known in the UK for its £10bn acquisition in 2021 of UK supermarket chain Wm Morrison, which it bought following a competitive bidding process that also involved fellow US investment house Fortress. 

Since then the retailer has had to contend with the effects of inflation as well as the heavy debt load it took on when CD&R acquired it. CD&R’s other assets include Motor Fuel Group, the UK’s largest independent petrol station operator, and car windscreen repair group Belron. 

To help boost performance at its portfolio companies, CD&R employs a bench of industry experts including former BAE chair Sir Richard Olver and former Boeing boss Jim McNerney.

The firm raised $16bn for its most recent flagship fund in 2021.

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