News & Analysis

CapDyn has levered, unlevered sleeves in latest secondaries fund

Global Secondaries VI has a levered sleeve targeting returns of more than 20%, a feature more commonly found in credit funds.

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Capital Dynamics is allowing limited partners to opt in to using leverage on its latest secondaries fund.

Global Secondaries VI has a levered sleeve targeting returns of more than 20 percent, compared with 15 percent for the unlevered sleeve, according to documents prepared for Pompano Beach General Employees Retirement System. The type of leverage employed is unspecified and the amount described as “in line with industry averages”.

It is not clear if this is the first Capital Dynamics secondaries fund to include two sleeves and the firm did not respond to a request for information.

While levered and unlevered sleeves are the norm in credit funds, they are novel in the world of secondaries where separate dollar and euro sleeves are “about as spicy as it gets”, said one London-based fund formation and secondaries lawyer.

Zug-headquartered Capital Dynamics is targeting $850 million for Global Secondaries VI with a hard-cap of $1 billion, according to the documents. The fund also features a GP-led co-investment sleeve, which is not included in the target.

Both sleeves have 10 percent carried interest over an 8 percent hurdle. There is a potential management fee discount of 5 percent on commitments of $25 million to less than $50 million, and 7.5 percent on commitments of $50 million to less than $70 million.

POMPGERS committed $7 million to the secondaries fund and the same amount to Capital Dynamics’ Mid-Market Direct V, according to a spokeswoman for the pension. These are the fund’s first commitments to private equity.

The 2018-vintage Fund V closed on $786 million in March last year after three years in market, Secondaries Investor reported. The fund had been targeting $700 million to invest in target smaller “off-market opportunities” on a global basis in the LP stakes, GP-led and structured processes markets.

Limited partners in Fund V include Oxfordshire County Council Pension Fund, Clwyd Pension Fund and City of Fort Lauderdale General Employees’ Retirement System, according to Secondaries Investor data.