Altos Ventures works on secondary deal for 2008 fund

  • Fund IV closed in 2008
  • Small fund that has produced outsized returns
  • GP looks to move assets into continuation fund

Altos Ventures is working on a process to pay back limited partners in one of the strongest performing venture funds of the past decade.

Altos, formed in 1996, is working with Lazard on a process to pull assets out of its fourth fund and move them into a new fund, known in the industry as a continuation vehicle.

This process will give the GP more time to manage the assets while providing cash back to limited partners in the fund, sources told Buyouts.

Altos closed Fund IV on about $85 million in 2008. The pool was generating a 31.7 percent net internal rate of return and a 8.5x multiple as of June 30, 2018, California Public Employees’ Retirement System performance data shows.

In other words, CalPERS committed $9.9 million to the fund and has received about $10.5 million in distributions, with about $84.2 million of cash out and remaining value, CalPERS information shows.

The deal is valued at “a few hundred million dollars” of net asset value, one source told Buyouts.

Altos didn’t return a request for comment. Clare Pickett, a spokeswoman for Lazard, declined to comment.

Altos had just over $1 billion in AUM as of March 2018, according to the firm’s Form ADV.

Venture firms have not been as active in the secondary world as buyout firms. Venture did see its share of secondary activity after the tech bubble burst.

New Enterprise Associates last year completed an about $1.3 billion secondary-backed spinout transaction that some market observers felt would spark more secondary activity in the venture market.

A venture GP said he knew of several firms in the late stages of planning secondary-type deals on older funds.

“I think this will be a trend, a very logical, rational trend,” the GP said. “The key is to find a win-win-win in the portfolio. … It takes time, curation and managing conflicts.”

Update: This story was updated with a decline to comment from Lazard. 

Action Item: Check out Altos’s Form ADV here: