HarbourVest closes secondaries fund on $3.6bn

HarbourVest Partners held a final close on $3.6 billion at the end of June, for its latest secondaries fund, Dover Street VIII, according to a statement from the firm.

Dover Street VIII launched in 2011 with an original target of $3 billion, according to Private Equity International’s Research and Analytics division. The fund, which had a hard-cap of $4 billion, will make secondary investments in private equity, venture capital and leveraged buyout assets, according to documents from The New Hampshire Retirement System, an investor in the fund.

The fund was oversubscribed and received strong support from existing investors. “I think a lot of institutional investors look at the secondary market for its potential return profile coupled with a shorter duration,” said Brett Gordon, a managing director at HarbourVest.

Dover Street VIII has already completed four transactions, including last year’s $1.4 billion acquisition of Conversus Capital’s private equity portfolio. A number of early realisations from the fund have generated initial distributions from HarbourVest to investors, the statement read.

The New Hampshire Retirement System originally recommended a $30 million commitment to Fund VIII but later increased the amount to $50 million, citing HarbourVest’s complementary approach to secondary investments, a system spokesperson told PEI in February.

Other limited partners in the fund include the University of Houston and the University of Vermont.

The average annual management fee for Fund VIII is 0.81 percent and the preferred return rate is 7 percent, according to documents from the University of Houston. The fund’s carry rate is 12.5 percent, PEI previously disclosed.

After raising eight secondaries funds, HarbourVest has seen an explosion in deal flow and opportunities, as well as increased competition. And there’s anticipation that the future of the secondaries market will continue to be bright. 

Dover Street VII, a 2007 vintage, closed on $2.9 billion in 2009 and focuses on North American and Western Europe secondaries investments.

Since its first partnership investment in 1978, HarbourVest has committed more than $25 billion to newly-formed funds and completed over $9 billion in secondary purchases.

HarbourVest has been competing with other firms in the secondaries market, including Goldman Sachs, which has raised at least $3.4 billion for its sixth secondaries fund, as of 30 June, and Hamilton Lane, which has raised about $728.4 million for its third secondaries fund, which launched with a $650 million target.

“The more private equity grows, the greater the opportunities become in the secondaries market,” Gordon told PEI.“We like the opportunity set in front of us. We think there will be lots of opportunities for those who generate good return.”