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Private Equity Funds of Funds in Market with an Allocation to Secondary Investments - January 2014

by Francesca Braganza

  • 23 Jan 2014
  • PE

Diversification is one of the primary draws of a fund of funds vehicle for investors; the variation does not necessarily lie solely in the fund types, geographies or vintage years invested in, but could also extend to the splitting of allocations between the primary and secondary markets. In doing so, private equity funds of funds spread the high level of risk associated with the asset class, and furthermore, gain exposure to a wider range of vehicles than those currently raising capital. 

There are currently 172 private equity fund of funds vehicles in market seeking capital from investors, according to Preqin’s Investor Intelligence online service, 81 (47%) of which include a specific allocation to the secondary market. The private equity funds of funds in this sample are targeting an aggregate $23.3bn in capital commitments, with plans to actively seek secondaries opportunities over the course of their investment periods. 

These vehicles plan to invest in a range of fund types and geographies, including those focused on the US (56%), Europe (23%) and other countries based outside of North America and Europe. Of the 81 fund of funds vehicles that include secondary investments in their strategy, 58% of the fund managers are based in North America and 36% have their headquarters in Europe. The remaining fund of funds managers are headquartered in either Asia (4%) or regions outside of the US, Europe and Asia, namely South Africa and UAE. 

The largest fund of funds vehicle in this sample is HarbourVest Partners IX - Buyout Fund, which is targeting $1.5bn in investor capital commitments. The fund solely focuses on investing in buyout vehicles, and will consider making primary, secondary and direct investments in order to diversify its exposure. HarbourVest Partners IX - Buyout Fund primarily targets US-focused funds, but will also consider global opportunities. 

Abbott Capital Private Equity Fund VII is the second largest fund of funds vehicle currently in market with an interest in secondary market participation. The fund is targeting $1bn in total, and allocates up to 20% of its total capital to secondary investments. Abbott Capital Private Equity Fund VII seeks exposure to buyout, venture capital and special situation vehicles, with a primary focus on opportunities in North America.

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