Neuberger closes fourth secondaries fund on $2.5bn hard-cap

Investment firm Neuberger Berman has held a $2.5 billion final close of its fourth secondaries fund, NB Secondary Opportunities Fund (SOF) IV, as reported by sister title Private Equity International.

SOF IV launched in April and exceeded its $2 billion target, the firm said in a Thursday statement. Neuberger’s Brian Talbot told PEI that the average transaction is around $20 million to $25 million.

Talbot, one of the firm’s managing directors and the founder and global co-head of secondaries said the fund had demand beyond the hard-cap. He added that the fund has not made any investments so far but expects to begin investing this quarter, after the predecessor, SOF III, finishes deploying capital.

SOF IV is region-agnostic and seeks to acquire investor stakes in private equity funds, direct investments, co-investments and structured private equity, the statement said.

“As part of our strategy, we try to leverage relationships we have with both GPs and LPs in an effort to source less competitive opportunities,” he said. “We’re not active on the auction side; most of our deals are privately negotiated.”

SOF III closed on $2 billion in November 2013. According to a regulatory filing with the US Securities and Exchange Commission from October 2013, SOF III had received 111 commitments. Talbot told PEI SOF III is about 95 percent committed. Specific internal rate of return figures were not available for earlier secondaries funds, but documents from the Alaska Retirement Management Board (ARMB), which committed $50 million, said the firm’s previous two funds were in the top quartile when compared to both other secondaries funds and primary private equity funds. Neuberger’s first three secondaries funds averaged an annual cash distribution yield in excess of 20 percent.

Neuberger benefits from limited competition because it focuses on mid-market single asset purchases and proactive deal sourcing as opposed to large-cap deals, according to the ARMB memo from May.

SOF IV is led by Talbot; Tristram Perkins, managing director and global co-head of secondaries; Ethan Falkove, managing director and Neuberger’s secondary investment committee member; and managing director Benjamin Perl.

Limited partners in SOF IV include public and private pensions, endowments, foundations, insurers, family offices and high-net-worth investors from North America, Europe, Latin America and Asia, the statement said.

According to Talbot, at least 80 percent of LPs in previous funds re-upped to commit to SOF IV, and garnered interest from regions such as Europe, the Middle East, the US and Canada.

As previously reported by Secondaries Investor, LPs in this fund include ARMB’s commitment; San Antonio Fire and Police Pension Fund, which committed $15 million; and City of Milwaukee Employees Retirement System, which committed $25 million.

Neuberger has over $40 billion in assets managed by its private equity arm, while overall, the firm manages $255 billion in assets as of 30 September, according to the statement.