Private equity shop Quadrangle halts fundraising

Quadrangle Group has confirmed that it has halted fundraising for its third planned fund, which has stalled since last fall when the financial crisis squeezed credit markets in earnest.

Quadrangle’s managing principal and founder, Steve Rattner, left the firm in February to head President Barack Obama’s auto industry task force, but sources close to the firm reject the idea that his departure and the decision to put the fund on hold are connected in any way.

Quadrangle partners declined comment.

That the private equity group stopped trying to raise funds in the current market environment is hardly surprising: PE capital flows were down by nearly 70% for the first quarter of 2009, compared with the same period a year ago, according to PitchBook Data’s April survey of the private equity industry.

Mr. Rattner was tapped for the government post in late February, and the private equity shop had new management in place the next day, naming Michael Huber and Joshua Steiner co-presidents.

At the Reuters Private Equity & Hedge Fund Summit in New York last month, Mr. Steiner publicly announced the temporary freeze on the third fund.

The firm already has two private equity funds under management, one that launched in 2000 and has about $1 billion, and a second fund launched in 2005, targeting about $2 billion. The group dismantled a $500 million media hedge fund in the fall after stiff losses, returning investor’s capital.

It’s second fund is 75% capitalized, meaning that it has received three quarters of the money its investors originally committed back in 2005, when the firm launched the fund.

The original fundraising contract was made with Mr. Rattner as the managing principal, so his departure triggers a clause giving investors an “out” from the final payment of their capital commitment. Investors have until the end of this month to declare whether they will complete their capital commitment to the fund.