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Distressed specialist Multiplicity passes fundraising halfway point

The firm targets underperforming funds and difficult situations, which it says have increased as a result of covid-19.

Multiplicity Partners has held a first close on its latest flagship secondaries fund.

The Zurich-headquartered manager has raised around $50 million for LTO Fund III on the way to a hard-cap of $100 million, according to a statement. More than 90 percent of existing investors and a dozen new investors have committed so far, including family offices, private investors and institutions from Switzerland and the UK.

“With our opportunistic mandate and our distressed investing background, we are ideally positioned to buy funds that run into trouble because of the covid-19 crisis,” partner Andres Hefti said in the statement, adding that the firm has seen an increase in distress among tail-end private equity funds, and a surge in private debt and private real estate opportunities.

The 2018-vintage Fund II raised $30 million, according to data from secondaries marketplace Palico.

Multiplicity focuses on “providing liquidity for out-of-favour deals, often found in underperforming funds or tail-end situations where there is hardly any upside to NAV”, director Melissa Ackermann told Secondaries Investor in June last year. 

Its strategy is predicated on buying at a big discount. Based on historic distributions and assuming a secondaries fund has a target multiple of 1.6x, the ‘fair’ price of a bottom-quartile fund should be just 38 percent of net asset value, according to its own research.

Multiplicity’s 2016-vintage debut fund has net distributions-to-paid-in of 1.6x and a net internal rate of return above 40 percent, according to a source familiar with the fund.