HarbourVest runs $1bn-plus clean-up secondaries sale on older pools

Fund of funds sales represented the majority of LP transactions by asset managers last year, according to a recent full-year 2023 volume report.

HarbourVest Partners is running a large clean-up sale of LP stakes in past funds, two sources have told affiliate title Buyouts – a routine transaction that many funds of funds and secondaries managers use to give fund investors the chance to generate liquidity from their holdings.

The deal is part of a steady flow of LP secondaries sales that are keeping professionals busy this year. While GP-led deals like continuation funds remain a popular way for firms to try and deliver liquidity to LPs in older funds, LP sales continue to be a steady channel of liquidity for LPs, especially as pricing has remained relatively strong.

Clean-up sales are more popular with strong pricing, sources told Buyouts. “There are lots of funds of funds using the high-price environment to liquidate older funds,” said a secondaries market adviser not connected with the HarbourVest sale. “Pricing has come roaring back.”

HarbourVest, itself a major secondaries buyer, is working with PJT Park Hill on the sale, sources said. A buyer has been identified, one of the sources said, and the deal is heading towards a close.

The total portfolio is valued at $1.5 billion and includes a mix of stakes in buyout funds and other strategies, a second source said. It’s not clear if the sale is coming from HarbourVest’s funds of funds or secondaries funds, or a mix of both. Spokespeople for HarbourVest declined to comment.

HarbourVest traces its roots back to Hancock Venture Partners, part of John Hancock Mutual Life Insurance, according to the firm’s Form ADV. The original management team in 1997 took over through a management buyout, the ADV said.

The firm formed its first fund of funds in 1982 with $148 million in committed capital, the ADV said. HarbourVest manages approximately $127 billion in assets on a discretionary basis, and about $24.2 billion on a non-discretionary basis, the Form ADV said.

Fund of funds sales represented the majority of LP transactions by asset managers in 2023, according to a full-year secondaries volume report from Campbell Lutyens. “These LPs are particularly sensitive to a drop-off in distributions given the structural limitations of their fund life and carried interest structures,” the report said.

“As such, the market witnessed a meaningful spike in 2023 activity due to a lack of regular way exits from sponsors,” the report said.

Mike Catts, a partner at Hollyport Capital, spoke to Buyouts about legacy secondaries sales earlier this year, explaining that total AUM in funds that are 10-years old and older was approaching $1 trillion.

“In the legacy space, there are a lot of buyers who are going to be sellers this year as they have been waiting to execute a trade in a more attractive pricing environment,” Catts said. “Also, the large pensions have been starting to come off the sidelines as pricing improves and optical discounts have reached a level that’s acceptable for them to trade.”

LP sales such as the HarbourVest process accounted for around 51 percent of the $111 billion of estimated total volume last year, Campbell Lutyens said.