The Sterling Group LP, a Houston private-equity firm, said Tuesday that it raised $820 million for its third investment fund and exceeded its initial target of $600 million.

Investors in the limited partnership consisted of a mix of institutional investors and financial firms including Allianz Capital Partners Inc., Canada Pension Plan Investment Board, Constitution Capital Partners and the New York State Teachers’ Retirement System.

“We think prices are going to be more reasonable for the foreseeable future than they have been over the last four to five years,” said Kevin Garland, a partner at Sterling, about acquisition opportunities for the new fund.

Sterling will aim to invest the capital from the fund in middle-market companies valued between $100 million and $500 million, which operate in basic industries like distribution, industrial service and manufacturing.

“We have not changed our focus on basic industries for 28 years,” said Garland, who joined Sterling in 2001 after a seven-year stint at Enron Corp.

It’s an approach that has enabled the buyout group to obtain debt financing from lenders like BNP Paribas even in difficult debt market conditions, according to Garland. “Even in the tightest of credit markets we closed transactions,” he said.

In April 2009, for example, Sterling acquired fluid filter maker Velcon Filters LLC of Colorado Springs, Colo., for an undisclosed sum with debt from BNP Paribas and Amegy Bank of Texas, a commercial bank based in Houston.

Investing in businesses the firm’s dealmakers are familiar with has produced an impressive 47.7% return for Sterling since its inception in 1982. The private-equity group was established by former Baker International Corp. executive Frank Hevrdejs, now an advisory partner, and the late Texas financier Gordon Cain (Cain retired in 1992 at the age of 80).

The Texas private-equity firm began marketing Sterling Group Partners III LP with the help of Lazard placement agents Ben Sullivan and William Riddle early last year. Lazard also oversaw the firm’s fundraising effort for its $470 million second fund.

Sterling stated it will look to corporations seeking to divest non-core assets and family-owned businesses for deal flow.

Paul, Weiss, Rifkind, Wharton & Garrison LLP attorneys Robert Hirsh, David Mayo and Robert  Fleder provided counsel to Sterling on the new fund.