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Q1 fundraising lull hints at tidal wave to come

Final closes for secondaries vehicles fell 73% year-on-year, marking a four-year low, according to Secondaries Investor data.

Fundraising for private equity secondaries vehicles dropped off a cliff in the first quarter of this year with mega-fund closes expected later this year.

Just $2.74 billion was raised across eight funds in the three months to 31 March, according to Secondaries Investor data. The figure marks a 73 percent drop from the same period last year and a four-year first quarter low.

The largest fund to close was Metropolitan Real Estate Equity Management‘s Real Estate Partners Secondaries Fund II, which amassed $1.2 billion. The fund had already closed five investments as of January, according to Sarah Schwarzschild, Metropolitan’s head of secondaries.

Nordic direct secondaries specialist Verdane Capital Partners raised the second-largest fund during the period, collecting SKr6 billion ($692 million; €621 million) for its Verdane Capital X vehicle. Similar to other funds in the series, Fund X will acquire majority or minority positions in single companies or portfolios of companies in northern Europe and targets businesses with SKr50 million to SKr500 million in revenue.

New 2nd Capital‘s debut raise was the only fund to close focusing on complex secondaries. The firm, founded by former AlpInvest Partners executive Tjarko Hektor, raised $294 million for New 2ND Capital Fund I, exceeding its target of $250 million, a source familiar with the matter told Secondaries Investor in March.

France BEX Capital raised $365 million for its third fund. BEX Fund III included a novel class of shares called “X-shares” that are free from management fees and carried interest for non-governmental organisations and major non-profit foundations.

Secondaries funds are targeting at least $84.85 billion in total, according to Secondaries Investor data. At least 43 vehicles with known targets are in market seeking secondaries capital across private equity, real estate and infrastructure, as well as for preferred equity, according to Secondaries Investor data.

Of the 10 largest secondaries firms, according to the SI 30, at least seven are in market with secondaries vehicles seeking a combined $60.85 billion, accounting for 71 percent of the total capital sought.

Landmark Partners and LGT Capital Partners are also in market with secondaries vehicles seeking undisclosed amounts.

The low figure for final closes announced in the first quarter does not necessarily reflect the health of the fundraising market, according to Warren Hibbert, managing partner at placement agent Asante Capital. Many firms which have raised significant amounts of capital have yet to hold official final closes, he told Secondaries Investor.

“In terms of what has actually been raised, I suspect the figure is a lot higher,” Hibbert said.