Top 5 fundraises of 2019

This year saw the first of several big secondaries funds draw to a close, a taster for the expected bonanza in 2020 when Ardian and Lexington Partners, among others, are set to reach final close on flagship vehicles.

Secondaries funds and those with a secondaries pocket holding final close raised $34.3 billion in 2019, down from $48.2 billion in 2018, according to Secondaries Investor data.

Some well-known names came to market, including AlpInvest Partners, which is targeting $8 billion for its seventh secondaries programme, and BlackRock, which is seeking $1.5 billion for its debut vehicle.

Here are the top five fund closes of the year by size:

Strategic Partners

In July Strategic Partners held the final close on its eighth secondaries fund, the largest dedicated pool yet raised for the strategy. The firm took just 14 months to raise $11.1 billion for Strategic Partners VIII, outstripping its $8 billion target. The fund was already more than 40 percent deployed as of July.

The Blackstone secondaries unit achieved gross returns of 9.6 percent over the third quarter and 16.5 percent over the trailing 12 months. The $34 billion secondaries business grew 60 percent year-on-year and has generated 14 percent returns annually since inception, as of the end of the third quarter.

“There is a structural shortage of capital in secondaries, creating enormous opportunities for deployment,” said president and chief operating officer Jonathan Gray on the firm’s third quarter earnings call.

Glendower Capital

In July Glendower Capital, which spun out of Deutsche Asset Management in 2017, raised one of the largest ever first-time private equity funds.

The London-headquartered firm held a $2.7 billion final close on Glendower Capital Secondary Opportunities Fund IV, against a hard-cap of $2.5 billion, with support from investors such as Public School Retirement System of the City of St Louis and Montgomery County Public Schools Pension Fund.

Aside from funds that are state-backed or linked to a corporate entity, only DCP Capital, set up by former co-head of KKR Asia David Liu, and Chinese tech giant Baidu, come close, with debut offerings of $2.5 billion.

Whitehorse Liquidity Partners

In October, preferred equity specialist Whitehorse Liquidity Partners smashed the target of its third fund, having launched its debut vehicle only three-and-a-half years before, Secondaries Investor reported.

The Toronto-headquartered firm raised $2 billion for Whitehorse Liquidity Partners Fund III, beating its $1.5 billion target. The fund closed on its hard-cap and was oversubscribed.

“The increase in the size of Fund III reflects the scale of the market opportunity we have created and are capturing,” Yann Robard, managing partner at Whitehorse, said at the time. As of October the firm had executed 39 pending or closed transactions, representing $3.2 billion, since it was founded in 2015.

Adams Street Partners

In June Adams Street Partners held a $2 billion final close on its latest secondaries programme.

The Chicago-headquartered investment manager raised $1.05 billion for Adams Street Global Secondary Fund 6 and the remainder via separately managed accounts. It targets vehicles that are between three and eight years old through the acquisition of fund interests, direct secondaries and via GP-led transactions.

“We believe pricing remains high, particularly in transactions where the buyers are focused on providing beta exposure and rely on leverage to generate returns. Adams Street’s strategy is to steer clear of such situations, and focus instead on seeking out assets with strong growth potential, less leverage, and less cyclical end-markets,” head of secondaries Jeff Akers told Secondaries Investor.

Metropolitan Real Estate Equity Management

A real estate fund rounds off the top five. At the very start of the year, Carlyle Group subsidiary Metropolitan Real Estate Equity Management closed its second real estate secondaries fund on $1.2 billion, outstripping its $750 million target.

The fund provides liquidity to investors who want to exit single vehicles, pooled funds and co-investments, with a focus on core assets in the US, Western Europe and developed Asia.

Many investors gravitated towards the fund as a means of scaling their portfolios quickly, head of secondaries Sarah Schwarzschild told Secondaries Investor.

“We have a sovereign wealth fund investor that’s building out a portfolio and they’re using secondaries to get invested quickly, layering in primary investments and expecting the secondary fund, as it liquidates, [to] fund some of the future capital calls of those other investments they’re making,” she said.