In 2014 at least four firms closed their first dedicated secondaries funds, according to PEI’s Research and Analytics division.
Raising a first-time secondaries fund, let alone a first-time private equity fund has its challenges and requires a certain level of preparedness.
“You inch your way there and you have to be prepared to hear a lot of ‘nos’,” one secondaries fund manager said. “A lot of the ‘nos’ come from limited partners that don’t invest in first-time funds or that don’t fit secondaries in their private equity portfolio.”
For Northleaf Capital Partners, the first dedicated secondaries vehicle was the firm’s eighth fund (excluding co-investment vehicles), which allowed it to have cornerstone LPs that knew the firm and had committed to prior funds.
“I think it is important to have a cornerstone to build the first close then you can bring in new investors. For us they were LPs that were more attracted to the secondaries strategy, compared to fund of funds,” said Northleaf managing director Michael Flood.
Northleaf was also at an advantage because it had a secondaries track record, having invested in the market since 2003 through its fund of funds.
“Given we were an existing team, although we didn’t have dedicated capital, we had been investing in the space and people are generally more comfortable knowing that,” Flood added.
Aberdeen is the only reported GP to have closed its first real estate secondaries fund this year. Aberdeen European Property Fund of Funds was oversubscribed and already 38 percent committed to eight investments, giving the firm exposure to more than 200 European properties.
“The secondaries market is particularly attractive with an increasing number of opportunities, with investors becoming more active in the management and composition of their indirect property portfolios,” global head of alternatives Andrew McCaffery previously said.
The Carlyle Group’s Metropolitan Real Estate Equity Management is also in market with its maiden real estate secondaries fund, which has a $450 million target. The fund had collected $70 million as of November.
Not included in the list above are secondaries funds raised under a new name or manager for the first time. These include Ardian Secondary Fund VI, which changed its name from AXA Private Equity in September 2013 and Strategic Partners VI. The $4.4 billion fund that closed in October was the first under The Blackstone Group name.
[box style=”rounded”][fivecol_three]Fund name
Aberdeen European Secondaries Property FoF
Northleaf Secondary partners
SwanCap Opportunities Fund SCS-SIF
Traveller Capital Partners I[/fivecol_three] [fivecol_one]Location
Source: PEI’s Research and Analytics division