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Tech giant Insight sets sights on secondaries

The $31bn manager is targeting secondaries investments through its 2019-vintage Fund XI and an in-market follow-on vehicle.

Insight Partners is repositioning itself to take further advantage of opportunities in the secondaries market.

The $31 billion technology investor sought approval from limited partners in Insight Venture Partners XI to remove the 5 percent limit on the proportion of commingled interests it can buy, according to a memo written by Donald Kendig, retirement administrator for Fresno County Employees’ Retirement Association.

The proposed amendment would also remove from the LPA a “fee offset” provision, which states that Insight cannot invest in commingled funds unless the extra fees are offset against carried interest or management fees.

“Already in the life of Fund XI, there have been two opportunities which Insight has captured, where they were able to buy secondary holdings of mature venture capital funds. In both cases, the fees were able to be offset or there were no additional fees, and the return on both investments has been 2x,” Kendig wrote in the document dated 4 November.

He recommended that consultant Hamilton Lane approve the amendment on FCERA’s behalf, concluding that the impact would likely be immaterial given the pension’s commitment size of $10 million.

The limit was put in place to reduce blindpool risk and to prevent LPs from facing a double layer of fees. Insight said in the document that it would only buy funds that were 75 percent committed, at the end of their investment period or “perhaps continuation investments for pre-existing commitments” to allay fears.

Venture Partners XI raised $9.54 billion by April 2020 from LPs such as Louisiana State Employees’ Retirement System, San Francisco Employees’ Retirement System and State of Michigan Retirement Systems, according to PEI data. It is not clear if the amendment has passed.

Insight is also raising a $1.25 billion fund to invest in its own portfolio companies. Insight Venture Partners X Follow-On Fund will make primary and secondaries investments in portfolio companies held by 2017-vintage Insight Venture Partners X, according to a document prepared by consultant Hamilton Lane for Teachers’ Retirement System of Louisiana.

“Many Fund X investments are presenting attractive follow-on investment opportunities beyond Fund X’s capacity,” the document noted.

It is not clear if the secondaries strategy involves targeting direct stakes in its portfolio companies, LP stakes, or both.

The follow-on fund has a GP commitment of 3 percent and can invest up to 25 percent in a single company. Forty-nine percent of the investments made by Insight since its foundation have been minority stakes. Its portfolio is 86 percent weighted towards North America, according to the document.

It is not clear which investments are in Fund X.

Fund X raised $6.31 billion by final close in July 2018 to invest in high-growth software businesses as well as e-commerce and internet services. Limited partners include the California Public Employees’ Retirement System, CPP Investments, Massachusetts Pension Reserves Investment Management Board and Pennsylvania Public School Employees’ Retirement System, according to PEI data.

Hamilton Lane declined to comment. Insight did not return a request for comment.