The final close for the fund, which had a $450 million target but no hard-cap, took place at the end of last week. The firm, which said the vehicle was in high demand, elected not to raise a much larger fund in line with its strategy of investing in high-quality managers in major markets at the mid to small end of the market.
This is the first fund Metropolitan has raised since being acquired by Carlyle in 2013 and its first secondaries fund. The firm already had plans to raise a fund with this strategy before the acquisition.
The fundraising process began in 2014 and Metropolitan held a first close in July 2014 on $70 million, according to the firm. Once the firm had a significant number of investments under its belt in 2015, Carlyle’s sales team stepped in and became closely involved in the middle of the year.
“We were the new kids on the block at Carlyle,” said David Sherman, Metropolitan co-founder and co-chief investment officer. “It took a while to get momentum in the market. It took a while to fully integrate with our parent Carlyle. It did not really come together until sometime in 2015.”
“By that time, we had seed investments in the fund. It makes a significant difference for investors when they can actually track the actual investments and the performance those investments are generating. It proves your strategy,” said Sarah Schwarzschild, a principal at Metropolitan in charge of secondaries investments.
The fund is split unevenly into three pockets, offering investors the choice to invest only in secondaries, only in co-investments or in both, with the interest in secondaries being slightly larger. “We gave investors a wide variety of choices to mix and match to suit their different portfolio needs,” said Sherman.
The fund has a 1 percent management fee and 10 percent carried interest, according to documents presented in May to the City of Jacksonville Police and Fire Pension Fund.
Metropolitan has already completed 14 transactions out of the fund, six of which were secondaries and the remainder being co-investments. So far, about 40 percent of the allocation for co-investments is already invested while 25 percent of the allocation for secondaries has been invested.
Within secondaries, the firm has predominantly purchased limited partnership stakes, but GP-led restructurings and direct secondaries are not precluded from the strategy.
“We have not found a GP restructuring to date that we feel was interesting enough to pursue but that’s certainly a possibility,” Schwarzschild said. “We would look at direct secondaries as well.”
Limited partners are global and include pension plans, ultra high net worth individuals and insurance companies. The Nebraska Investment Council committed $10 million to the fund at the end of 2015. The firm said it had exceeded its 1 percent target for GP contribution.
Metropolitan, which is part of Carlyle’s Investment Solutions business, has received $3.2 billion in aggregate discretionary capital commitments since the firm’s inception. It also makes primary investments in real estate funds.