Paul Capital launches $2bn secondaries fund

Secondaries specialist Paul Capital has launched its tenth fund targeting $2 billion, according to documents filed with the US Securities and Exchange Commission.

The fund will acquire limited partner interests in funds invested in North America, Western Europe, Asia-Pacific and Latin America, with a 20 percent exposure limit to emerging market funds in Asia and Latin America. Paul Capital has hired Edgeline Capital to help market the vehicle to select limited partners in the US, but will raise the majority of the capital in-house.

Paul Capital has attracted roughly half of its commitments in the past from US-based LPs, with the remaining half coming from investors outside of the US, and will make between 35 and 40 transactions from Fund X. The firm typically tries to attract 75 percent of its commitments from re-up investors and 25 percent from new LPs.

Paul Capital’s ninth and largest fund closed on $1.65 billion in 2008 and is nearly fully invested. Limited partners in Fund IX include the Arizona State Retirement System, Canada Pension Plan Investment Board and South Carolina Retirement System. The firm’s eighth fund raised $950 million in 2004. Fund VIII-B was generating a 9.62 percent IRR as of 30 September, 2011, according to performance information from the California State Teachers’ Retirement System.

Paul Capital is currently one of three finalists being considered by the Louisiana State Employees’ Retirement System as part of its secondary markets mandate search. The other two secondaries firms that will present to Louisiana’s board this week are Coller Capital and W Capital Partners. New England Pension Consultants is acting as advisor to the pension.

Secondaries firms have continued to set new records for capital collected during the past 12 months. Earlier this week, AXA Private Equity raised more than twice as much capital for its fifth vehicle as it originally planned, with $8 billion in commitments across the fund and its sidecar. The fund topped Lexington Partners’ seventh fund, which closed on a record $7 billion last July.

Paul Capital, meanwhile, has built a reputation for targeting smaller and more complex secondary transactions than some of its largest competitors.  Last July, the firm acquired an interest in a private equity portfolio managed by Cognis Capital for around €70 million. The firm picked up 20 debt and equity assets across an array of industry sectors in the deal, most of which were European.

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, and was the first secondary private equity firm to open offices in Hong Kong and Latin America, according to its website.

Paul Capital manages $7.3 billion across private equity secondaries, healthcare royalty and revenue interests.