After two strong consecutive years for private equity secondaries, with a bull market driven by LPs undergoing portfolio reallocations; regulatory reform forcing banks and insurance companies to divest their private equity assets; the consequence of the mega buyout boom years of 2005-2008; and certain endowment plans slowly moving away from the Yale model, we look into the latest fundraising statistics for the largest secondaries funds to close in 2013 YTD, as the fund type continues to present attractive opportunities to fund managers and investors across the globe.
So far this year, 16 private equity secondaries vehicles have held a final close, raising an aggregate of $13.5bn in capital commitments. The funds look to buy interests in vehicles focusing on global opportunities, with 63% targeting US-focused fund stakes, 25% targeting Europe-focused fund interests, and the remaining 12% seeking exposure to Asia and Rest of World regions.
Of these closed secondaries funds, the largest to have held a final close over the course of 2013 YTD is Dover Street VIII, which closed on $3.6bn having significantly exceeded its original $3bn target. The fund, raised by HarbourVest Partners, looks to purchase stakes in venture and buyout vehicles on the secondary market, and has a focus on the US, although it will consider global opportunities. Dover Street VIII will look to buy portfolios of fund interests as well as sole fund stakes, and will invest between 40-50% of the fund in direct secondaries.
The second largest secondaries vehicle to close in 2013 YTD, NB Secondary Opportunities Fund III, held a final close on $2bn, exceeding its target of $1.6bn. The fund is managed by Neuberger Berman, and seeks to purchase portfolios of private equity fund interests from investors looking to achieve liquidity before the end of the funds’ lives. NB Secondary Opportunities Fund III will primarily focus on purchasing fund interests in buyout vehicles and funds which are nearing the end or have completed their investment cycles, and will consider opportunities on a global scale.
Preqin’s Secondary Market Monitor online service currently tracks 31 private equity secondaries vehicles in market seeking over $26bn in capital commitments from investments.