New Mexico sells trio of fund stakes – exclusive

Partners Group has purchased stakes in funds managed by 3i and Apax at a price slightly above NAV.

The New Mexico State Investment Council has sold three European fund stakes to Partners Group after an initial approach from Partners several months ago, according to multiple sources familiar with the matter.

The interests in the three funds  3i Eurofund V, Apax Europe VI and Apax Europe VII  were sold at a 2 percent premium to NAV and together have roughly $4 million in unfunded commitments.

Partners Group and New Mexico declined to comment.

New Mexico originally committed $34.8 million to 3i’s Eurofund V, a €5 billion 2006-vintage vehicle. Other limited partners in the fund include the Florida State Board of Administration and Goldman Sachs Asset Management, according to PEI’s Research and Analytics division. The fund was generating a return multiple of 1.13x as of 31 March 2014 and its net internal rate of return was “decent”, according to a source. 3i recently bought back a stake from another LP in Eurofund V for £27 million, increasing the firm’s stake in its fund by about 2 percent.

New Mexico also sold its $31 million stake in Apax Europe VI and its $42 million stake in Apax Europe VII. The 2005-vintage Fund VI raised €4.31 billion and has been generating a 1.8x return multiple and a positive IRR, according to a source, while 2007-vintage Fund VII raised €11.2 billion and has been generating a return multiple of 1.2x for investors which include the California State Teachers’ Retirement System, Dartmouth College and AlpInvest Partners.

Last month, the Canada Pension Plan Investment Board bought stakes in Apax Europe VI from a group of investors including Adveq, HarbourVest Partners, Pomona Capital and Dutch asset manager Robeco.

Apax declined to comment.

3i and Apax were identified as non-core managers for New Mexico, part of the $19 billion institutional investor’s ongoing portfolio restructuring, meant to reduce its relationships by about 50 percent. Currently, New Mexico’s 25-year-old private equity portfolio has 120 funds with 80 managers, but the investment council wants to make bigger commitments to fewer managers. The restructuring process could take more than a decade, according to a source.

The portfolio sale is New Mexico’s second secondary transaction in six months. Earlier this year the investment council sold a portfolio of four fund stakes to Pomona Capital for $130 million. The funds included Cinven Funds III and IV and Clayton Dubilier & Rice Funds VII and VIII.  Prior to that, the investment council hadn’t done a secondary sale since 2006.