This week, Secondaries Investor reported that Intermediate Capital Group had collected $2.5 billion for its fourth strategic equity fund after half a year in market. The only fund series of scale to solely target GP-led deals, ICG expedited its return to market by two years to take advantage of limited partners’ appetite.
The news added credence to a notion already sweeping the Secondaries Investor newsroom: that 2021 is the year of the specialist. In the space of two days in March we reported on three final closes of funds, all with a niche focus and raised in rapid time.
San Francisco-based Revelation Partners hit the $350 million hard-cap on its third dedicated healthcare secondaries fund. The vehicle, which invests in areas such as medical devices, diagnostics, biotech and healthcare services, had been in market for less than three months and was 53 percent larger than its 2017-vintage predecessor. It was impressive for a strategy described by managing partner Scott Halsted as “the classic definition of a niche”.
Banner Ridge Partners raised $300 million for its first primary fund, which like its secondaries vehicle will invest in distressed, special situations and credit opportunities. The funds should be mutually reinforcing, managing partner Tony Cusano told affiliate title Buyouts, with information gathered through the secondaries portfolio creating opportunities on the primary side. DSCO Fund I was intended to be up to $150 million in size but “the market came to us”, Cusano said.
The third of the trio was Industry Ventures Secondary IX, which hit its $850 million hard-cap after eight months in market. The fund targets later-stage VC-backed companies though directs, limited partnership stakes and GP-led processes, with a yen for complexity that may discourage others. The fund was backed by blue-chip LPs such as Employees Retirement System of Texas and New Mexico Educational Retirement Board. It is 70 percent larger than its predecessor.
Part of this success is down to fortunate timing, as the past 12 months saw most of the largest players bring their flagship funds to a close. “It has obviously helped that AlpInvest and Coller wrapped up fundraising before we really got going,” said a US-based managing director, adding that his firm has benefitted from LPs wanting to quickly put capital to work in the GP-led opportunities brought about by the crisis.
At the same time, this success is indicative of positive fundamentals. A growing market is allowing secondaries firms to differentiate while increasingly adventurous LPs seek to supplement longstanding relationships with the Ardians and Lexingtons of this world. “Many investors, including some of the largest ones, are looking for diversification in the secondaries small and mid-market,” the MD said.
It goes to show that you don’t have to be a marketing and fundraising machine to raise money in today’s secondaries market.
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