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Paul Capital in €70m secondaries deal

The global secondaries firm acquired an interest in 20 Cognis Capital portfolio companies in the deal, which allows existing stakeholders to sell their stakes or rollover into the new fund.

Paul Capital has acquired an interest in a private equity portfolio managed by Cognis Capital for around €70 million out of its $1.65 billion ninth fund, according to a statement from the firm. The global secondaries firm also will provide follow-on capital to the investments.

The firm picked up 20 debt and equity assets across an array of industry sectors in the deal, most of which are European. Like many hedge funds, the London-based Cognis faced redemptions when the market crashed and was forced to liquidate assets, Paul Capital partner Elaine Small said.  However, after selling their liquid assets, they were left with illiquid alternative assets.

“What’s really driving all this activity is the need for liquidity from some hedge funds,” Small said.

In purchasing the illiquid assets, Paul Capital is giving existing stakeholders the option to either sell their stake or rollover into the new fund. The firm expects to exit a majority of the assets within 24 to 36 months, Small said.

Paul Capital was founded in 1991 as a provider of secondary liquidity to investors in private equity limited partnerships and portfolios of direct investments. The firm has offices in New York, Hong Kong, London, Paris, San Francisco and São Paulo. The firm manages $6.1 billion across private equity secondaries, healthcare royalty and revenue interests.

The firm’s ninth secondaries fund closed on $1.65 billion in 2008. Its eighth fund, which raised $950 billion in 2004, has generated a 9.84 percent internal rate of return as of 30 September, 2010, according to California Teachers’ Retirement System documents.