The University of Houston System approved a $7.5 million commitment to HarbourVest’s Dover Street IX, which is targeting $3.6 billion, according to a 19 November board meeting webcast from the endowment.
Boston-headquartered HarbourVest expects to invest about 80 percent of the fund in the US. Additionally, it plans to split its strategy into two parts, with one-third of the fund being used to purchase limited partnership interests and the remaining two-thirds to be deployed into what the firm calls complex deals, according to Katherine Chu, senior investment director at Cambridge Associates, the endowment’s investment consultant. Complex deals can include tender offers and captive-team spin-outs.
“Secondaries as we see right now are somewhat expensive,” Chu told the board. “You’re not getting much discount on secondaries transactions so what we like to see and that Dover does well, is people doing transactions that not every person down the street can do,” she added, referring to those more complex secondaries transactions.
She noted that competition for complex transactions is a bit lower than for LP stakes. “In an expensive environment, we like that they have a different strategy,” she said.
Chu also told the endowment that economics, meaning mainly fees, at HarbourVest are spread over all the different strategies within the firm, but that it has not really affected their performance.
Other investors in the fund so far include the City of Fort Lauderdale General Employees’ Retirement System.
The University of Houston previously committed $4 million to Dover Street VIII. That fund has an average yearly management fee of 0.81 percent and a 12.5 percent carried interest. The endowment noted in a meeting document that the firm has so far called $2.4 million of the initial commitment.