MetLife Investment Management has become the latest insurer to use the secondaries market to seed a third-party private fund.
The asset management arm of MetLife Inc has closed a $1.6 billion fund of funds vehicle, $1.2 billion of which takes the form of private equity and venture capital stakes acquired off its own general account, according to a statement.
HarbourVest Partners was lead investor on the transaction, a portion of which was syndicated among institutional investors. The portfolio includes funded and unfunded commitments, and an additional $400 million of follow-on capital to make new fund commitments.
Campbell Lutyens advised on the deal.
MetLife Investment Private Equity Partners will be managed by the MetLife team and is the first step in the creation of a private equity fund investment platform targeted at institutional clients, according to the statement.
The portfolio consists of around 80 fund positions diversified by age and sector. These include stakes in Equistone Partners Europe Fund IV, Investindustrial VI and BC European Capital IX, according to UK public filings.
MetLife’s general account held $14.0 billion in private equity assets at the end of 2021, the statement said.
Similar processes have been carried out by several insurance companies in recent years. Manulife has done two such deals, one involving its infrastructure investment team, the other its private equity team, Secondaries Investor reported.
In October, Churchill Asset Management closed a secondaries fund and a co-investment totalling $1.5 billion. The secondaries fund was seeded with a portfolio of 35 US mid-market private equity funds acquired off the Nuveen subsidiary’s balance sheet by Ardian, which also underwrote the unfunded co-investment vehicle.
Such processes give investors access to a diversified portfolio of assets managed by a group with a good track record. The insurance companies get to grow their third-party AUM and create a new fee stream, which is often viewed more favourably by equities analysts than strategies focused on multiple expansion.
“[Internal] teams often have a good track record, but if they raise a blindpool fund and are competing against traditional funds of funds that have been doing this for 20 years, it’s tough,” added David Perrin, a partner with Campbell Lutyens, speaking earlier this year to Secondaries Investor. “If you put in a portfolio of high-quality assets, all of a sudden you can take what might be a 24-month fundraise and do it in seven to eight months. Then you are suddenly back on Fund II within two years.”