Inside the Montana fundraise

This week Montana Capital Partners revealed the closing of its latest secondaries fund on its €100 million hard-cap. The fund launched in midsummer and closed three months later in mid-October.

Marketing its €80 million debut fund last year took Swiss-based Montana six months, so how did the three and a half-year-old firm manage an even quicker process this time around?

Co-founder and partner Christian Diller explained to me how talking to a select group of investors was key.

How was raising capital for Fund II different from the first fundraise?

We started Fund II with our existing investors, who ended up committing more than €80 million, slightly more what we’d raised from them for Fund I. Then we selectively approached parties that have been following Montana closely or that tried to get into Fund I.

How would you characterise Montana’s investment base?

There are 12 investors in Fund II, compared to only eight in our first fund. They’re made up of UK and Swiss pension plans and European family offices, which committed an average of €8 million. Some committed between €3 million and €5 million, while others put in as much as €20 million. We didn’t target investors in the US or other regions because space in the fund was very limited.

How did you convince your existing investors to re-up?

The existing investors did due diligence on our firm only a year ago and since then we have kept them well-informed. We have close relationships with them – they know the type of transactions we’ve done and the performance of our transactions very well. Our advantage is that we have a small investor base, which allows us to have individual conversations about dynamics and structures in detail and exchange views.

Why do family offices find your proposition attractive?

Family offices are more interested in this side of secondaries because it’s well-differentiated and offers the opportunity for attractive returns. We invest in smaller transactions, usually single interests in mid-market funds. These also attract family offices on the primary side and they in turn get to know these managers better.

Pricing for secondary assets has been going up for some time now. How did this affect fundraising?

Pricing of the secondary market has increased over the last year in general, especially in large transactions which have been run by intermediaries. At the same time, there have been attractive deal opportunities in some niche areas, like the smaller end or in co-investments and fund of funds stakes. Directly sourced transactions also offer the possibility to create customised and more complex transactions. Our investors appreciated that our niche strategy worked out very well which was a plus for our fundraise.

After closing a secondaries fund in both 2013 and 2014, Diller said the firm expects to be back in the market in 2015, depending on timing of its investment activity. He also added the firm’s investment strategy will remain unchanged for the future. “What’s important is to follow the same investment strategy going forward, because we know it’s worked very well.”