Deutsche Asset and Wealth Management’s private equity group has held a first and final close for its third secondaries fund on its $1.65 billion hard-cap.
DB Secondary Opportunities III is almost three times the size of its $614 million predecessor, which closed in December 2012 and is now fully deployed.
The oversubscribed fund attracted 30 institutional investors and more than 300 private client investors, including public and corporate pension plans, sovereign wealth funds, foundations and endowments, insurance companies and family offices. In July, the fund had collected $293 million from private clients – $234 million of came from US investors and $59 million came from international investors.
A third of the fund’s LPs are from North America, a third from German, and the remainder from the rest of the world. A substantial number of LPs are returning investors, Carlo Pirzio-Biroli, Deutsche AWM’s global head of private equity said.
Debevoise and Plimpton advised on the fundraising.
Fund III will invest in 30 transactions of between $1 million and $500 million each, Pirzio-Biroli said. He added that in order to be able to successfully operate across such a broad continuum, it was necessary to raise a larger fund.
“To pursue secondary value investing globally [the fund needs to be] large enough to credibly underwrite sizeable attractive $200-$500 million transactions, but small enough to be able to snatch smaller $1 million [to] $25 million opportunities.”
Pirzio-Biroli said the larger fund size did not indicate a change in strategy; rather, it was a reflection of changes in the market. “[Secondaries have shifted from] a cyclical distressed play toward a robust market where LPs trade for a wide variety of reasons. The market has become taller, wider and deeper. The market has more than doubled since 2007.”
Although pricing is higher, the mid-market is seeing a lot of dealflow, and funds need to be sized between $1 billion and $2 billion to take full advantage of the opportunities on offer, according to Pirzio-Biroli. The fund will be making value investments in any attractive opportunity with an underlying private equity investment, and the team has several deals lined up for the next two months, he added. “We have a very strong pipeline and expect the fund will be materially invested in attractive transactions by year-end.”