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Neuberger Berman buys $200m of secondaries stakes

The secondaries market will become much more active in 2010 ‘as continued portfolio net outflows force investors to intensify their search for liquidity'.

Neuberger Berman, the asset management spin-out of bankrupt Lehman Brothers, has completed a $200 million acquisition of 21 private equity investments from a European family office.

The investment is being made out of NB Secondary Opportunities Fund II, a $1.7 billion fund that closed in the summer of 2008, just before Lehman went bankrupt in September.

A spokesperson for Neuberger declined to give details of the transaction.

“Leveraging our experience and capabilities and utilising our relationship with the underlying funds’ general partners, the team was able to thoroughly examine the portfolio and meet the seller’s tight timeframe,” Brian Talbot, managing director and head of the secondaries team at Neuberger, said in a statement.

Neuberger had an existing relationship with the seller and with the managers of the underlying fund interests. “The seller had certain price objectives they needed to meet, [and] certainty of closing was very important to them,” Talbot told PEO in an interview.

Discounts on the fund interests fell in the range of 50 percent, Talbot said. Assets included large-cap and mid-cap buyout funds as well as some special situations and venture capital funds. Also, the assets were mostly well-funded commitments.

NB Secondary Opportunities Fund II is about 24 percent invested. The secondaries team is led by Talbot, and managing directors Tristram Perkins and Ethan Falkove. The team manages about $2.5 billion of capital for investments in the secondaries market.

Neuberger remains a patient investor despite a flood of opportunities crowding the secondaries market this year. “We saw a significant amount of opportunities in the last 18 months to invest, we could have invested the entire fund two times over,” Perkins said. “We’ve been disciplined about the deals we are bringing into the portfolio.”

The secondaries market will become more active in 2010 “as continued portfolio net outflows force investors to intensify their search for liquidity and bid-ask spreads continue to tighten”, Perkins said in a statement. “Factors contributing to this tightening include GP write-downs and signs of stability in the economy, as well as indications that lenders are willing to work with GPs to address the refinancing risk that overhangs many of the 2006 and 2007 vintage-year buyouts.”

Neuberger’s secondaries funds are just one part of its massive, $14 billion alternatives business, which includes private equity, hedge funds of funds and private equity co-investments.

Neuberger spun out from Lehman Brothers earlier this year after a management group won a bankruptcy auction for the business, beating out a $2.15 billion bid from Bain Capital and Hellman & Friedman.