The target size and terms of StepStone‘s latest secondaries fund were revealed in an investment report prepared for the Los Angeles City Employees’ Retirement System (LACERS), which also detailed the performance of the firm’s previous vehicles.
StepStone is seeking $750 million for StepStone Secondary Opportunities Fund III (SSOF III), more than double the target of its predecessor fund, according to the document submitted by advisor Portfolio Advisors to the Californian pension. The fund’s hard-cap is undetermined.
A US Securities and Exchange filing from January shows the firm had raised almost $94 million for SSOF III.
SSOF III will invest in the lower end of the secondaries market, which is less efficient, and opportunistically on larger deals where favourable dynamics exist. It will focus on buyout, venture capital, growth equity, real estate, infrastructure and distressed debt strategies mainly in North America, as well as Europe, Asia and Latin America.
StepStone will target deals on average between $20 million and $3o million, with no deal exceeding 10 percent of the fund’s size. Its commitment period will be four years from the final close.
The fund has a 12.5 percent carry and an 8 percent hurdle rate. Its management fee is 1.25 percent of aggregate commitments, which drops to 1.125 percent post-investment period with a 0.125 percent reduction each year to a minimum of 0.05 percent of total commitments.
StepStone, which does not use placement agents for fundraising, will make a 1 percent commitment to the fund, the documents show.
SSOF III, which launched last year, has received a $30 million commitment from Fubon Life Insurance and $25 million from Los Angeles Fire & Police Pension System, according to PEI data.
LACERS’ board approved a commitment of up to $25 million to the fund. This is LACERS’ first commitment to a StepStone secondaries fund and its third commitment to a StepStone-sponsored fund, the documents show.
The keyman provision covers Thomas Bradley, Mark Maruszewski and four of 12 other senior partners at the firm.
The firm’s 2012-vintage StepStone Secondary Opportunities Fund II (SSOF II) had a 31.8 percent net internal rate of return and a 1.4x net multiple on invested capital, according to the document. SSOF II closed on $450 million in 2013, above its $350 million target, according to PEI data.
StepStone declined to comment.