AlpInvest launches $2.3bn JV with Northwestern Mutual Capital

AlpInvest Partners has formed a $2.3 billion partnership with Northwestern Mutual Capital in which it is buying into a large portfolio of private equity fund stakes while at the same time supporting the company’s co-investment program, sources told Buyouts.

The deal is an example of the kind of complex transaction LPs can use to capture liquidity from their private equity programs at a time of slow exit activity. This type of transaction enables the seller to use proceeds to support other strategic objectives.

Campbell Lutyens worked as adviser on the deal. AlpInvest, owned by Carlyle Group, is buying stakes in fund interests held by Northwestern Mutual Capital, which will retain exposure in those funds. The fund interests will be moved into a joint venture vehicle in which management responsibilities will be shared between AlpInvest and Northwestern Mutual Capital.

Northwestern Mutual can use proceeds in various ways, including building up its co-investment program, which invests directly into sponsor-backed mid-market companies, sources said. Northwestern Mutual’s strategy invests across sectors and sponsors and has committed to an average of 30 co-investments annually over the past five years.

The deal is a way for Northwestern Mutual to unlock liquidity from the portfolio while staying in GP relationships it doesn’t want to lose, sources said. AlpInvest also will provide a portion of fresh capital to Northwestern’s co-investment program.

“Secondary transactions are an important portfolio management tool for Northwestern Mutual Capital, and we are thrilled to have generated a large portion of primary capital for reinvestment into future co-investment interests,” Daniel Julka, head of Northwestern Mutual Capital, said in a statement to Buyouts.

Northwestern Mutual Capital managed more than $6 billion of PE fund exposure, according to the company’s website.

The deal follows other complex spinouts, joint ventures and managed fund transactions all built on a secondaries foundation. Last year, Wells Fargo sold $2 billion worth of PE and credit fund stakes in vehicles managed by Norwest Equity Partners and Norwest Mezzanine Partners in which it was able to generate new capital for future investments. AlpInvest led the transaction along with Lexington Partners, Pantheon and Atalaya Capital.

These types of deals involve “working with captive investment teams inside banks and insurance companies, across a range of strategies, to use secondaries solutions to unlock capital from existing portfolios to support their go-forward activities,” said Michael Hacker, Partner with AlpInvest.

AlpInvest, meanwhile, had a busy year last year, deploying around $8 billion, with $7 billion from the flagship fund and $1 billion from portfolio finance. Activity was across 25 unique investments – 19 from the secondaries fund and six from portfolio, Buyouts previously reported.

LP portfolio sales are driving market activity as pricing, especially for buyout funds, is hovering in the 90 to 95 percent of net asset value range – a pricing point in which LPs are likely to transact.

“Improving exit activity may take some pressure off LPs to complete liquidity-driven portfolio sales; however, we believe liquidity will remain top-of-mind for LPs and the trend of active portfolio management is likely to continue driving strong LP-led volume,” according to William Blair’s full-year secondaries volume survey.

LP portfolio sales led secondaries activity last year, tallying an estimated $66 billion or 59 percent of total volume, according to the 2023 full-year volume survey from Greenhill & Co. Total volume was estimated at around $111 billion, Greenhill said, in line with other surveys from Jefferies, Evercore, Lazard and PJT Park Hill.

Update: This report was updated to provide more context about the details of the transaction.