LGT buys tail-end stake from Pantheon and Diageo

Sales of stakes in tail-ends – mature funds which often hold a handful of portfolio companies – are expected to increase as a percentage of the secondaries market this year.

LGT Capital Partners has acquired a stake in a tail-end European buyout fund from Pantheon and the pension trust of drinks manufacturer Diageo.

The Switzerland-headquartered investment firm used its Crown Europe Small Buyouts III vehicle to acquire Pantheon’s and Diageo’s entire stakes in Graphite Capital Partners VI, according to a UK regulatory filing. The deal closed on 19 May.

Graphite Capital Partners VI is a 2003-vintage fund that closed on £375 million ($531 million; €474 million), according to PEI Research & Analytics. Limited partners in the fund, which is managed by London-based Graphite Capital, include Goldman Sachs Asset Management, State of Wisconsin Investment Board and West Midlands Pension Fund.

Crown Europe Small Buyouts III is a €500 million fund of funds from 2012, according to PEI data.

This is at least the second joint sale from Diageo and Pantheon vehicles – in February, they both sold their stakes in IK Investment Partners’ 2004-vintage buyout fund to London tail-end specialist Hollyport Capital. Pantheon had held that stake, as well as its interest in Graphite VI, through its 2001-vintage $420 million Pantheon Europe Fund II.

Sales of stakes in tail-end funds are expected to increase as a proportion of the overall secondaries market this year, with a January report by Campbell Lutyens showing 86 percent of portfolios sold by the top 30 secondaries sellers comprised highly mature fund investments, often holding a handful of assets.

Diageo declined to comment. LGT and Pantheon did not return requests for comment by press time.