The secondaries market is heading towards its largest yearly transaction volume yet, amid a backdrop of falling year-on-year capital raising over the past 12 months from last year’s record haul.
Despite a slight gross capital drop-off, 73 funds – the most ever in a year – held final closes through mid-December totalling $61.7 billion, according to Secondaries Investor data. While $37 billion shy of last year’s hoard, 2021 fundraising is already $13.9 billion past the mark made by the third biggest year ever, 2018.
The absence of market giants Ardian, Lexington Partners and Blackstone Strategic Partners brought down this year’s fundraising total. Those firms’ most recent programmes made up $39.1 billion of full-year 2020’s $98.7 billion. As they deploy capital, other players came to the fore of investor interest this year.
Here are the top five fund closes of the year by size:
The year began with a bang when Coller Capital closed on $9 billion in January for its latest secondaries programme Coller International Partners VIII. LPs include National Pension Service of Korea (NPS), Maryland State Retirement and Pension System, New Hampshire Retirement System and Fubon Life Insurance.
The London-headquartered manager is understood to be in play, as Secondaries Investor reported in September. The additional $9 billion of AUM would add to its attractiveness as a target: large asset managers demonstrated in this year’s rush of secondaries M&A transactions that it is possible to gather alternatives AUM efficiently with the stroke of a pen.
Pfäffikon-headquartered LGT Capital Partners closed on $4.5 billion in May for its Crown Global Secondaries V. The fund, which launched in 2019, will continue to address portfolios of limited partner interests and more complex GP-led transactions, and counts Cathay Life Insurance and China Life Insurance (Taiwan) among its LPs.
On the same day, the firm said it had closed on an additional $1.5 billion for Crown Secondaries Special Opportunities II, the 10th biggest standalone close of the year, to focus on single and concentrated asset opportunities. That fund has typically invested $40 million to $100 million per transaction. However, LGT can underwrite up to $250 million per asset thanks to certain mandates where investors have an appetite for syndicated co-investment opportunities. Both vehicles were roughly 35 percent committed as of the end of June.
Whitehorse Liquidity Partners made waves in April when it closed on $4 billion for its fourth programme, Whitehorse Liquidity Partners IV, bringing its fundraising total to $7.5 billion since its 2015 founding. That fund had delivered a 1.23x net MOIC as of 31 March, before the official close, according to documents from Minnesota State Board of Investment.
Just four months later, the firm returned to market with its fifth programme, targeting $5 billion. Whitehorse intends to construct a portfolio for the fund of between 15-20 structures generally ranging from $100 million to $500 million. Minnesota SBI proposed a $100 million commitment to the fund, in line with its commitments to the previous two vehicles.
Hamilton Lane closed on $3.9 billion for Hamilton Lane Secondary Fund V in February, capping off a 25 month fundraise. Recent deals it has backed include lifting Wireless Logic from 2015-vintage Montagu V, one of the largest single-assets in Europe this year, which Hamilton Lane co-led with Coller; and a fund restructuring of healthcare assets owned by Beijing-based Legend Capital, also co-led with Coller.
The firm also began raising Hamilton Lane Infrastructure Opportunities Fund, which can invest 30-40 percent in secondaries. The rest will come from direct and co-investment opportunities. It has raised $310 million as of the end of the July and could stay in the market as late as late as March 2022. The vehicle, which has an undisclosed target, has already begun to deploy capital.
This compares with €1.2 billion raised for 2016-vintage predecessor Fund 4, according to Secondaries Investor data. More than half of the commitments to Fund 5 came from new investors, while around 90 percent of existing 17Capital investors committed capital to the new vehicle.
Demand for “flexible and non-dilutive” portfolio financing has reached “unprecedented levels”, said managing partner Pierre-Antoine de Selancy, in a July statement.
“We are seeing increasing demand for portfolio finance to support both offensive and defensive strategies,” de Selancy told Secondaries Investor in January.