Chase Unloads $1 Billion LP Portfolio

In what one source claims is the largest-ever secondary sale of existing limited partnership interests, Chase Capital Partners recently unloaded $1 billion of limited partner interests to Lexington Partners and Hamilton Lane Advisors. The deal had been anticipated for weeks, as Chase had made a handful of public statements alluding to the fact that it planned to eventually liquidate as much as $2 billion worth of LP interests in order to finance additional investment activities.

In fact, the private equity unit of Chase Manhattan Corp. began laying the groundwork for the offering back in September by contacting a handful of potential buyers and requesting various bits of background information. Following the pre-screenings, Chase narrowed down the field to four firms, finally settling on Lexington and Hamilton Lane last month.

“There are only a handful of groups that buy secondary partnership positions,” said Nick Harris, general partner with Lexington Partners. “But I think that number is beginning to grow because these interests are usually a few years old and you can see what you?re buying.”

The bulk of interests sold by Chase were in domestic buyout funds, although there were also a significant number of venture capital, international and mezzanine partnerships involved in the final mix.

“It?s a pretty nice list of general partners,” Harris said. “On average, they are all three to four years old and there are several multiple partnership interests in there.” Lexington Partners funded its share of the deal with capital from three of its managed secondary funds, and spent so much that it is planning to launch a new $2.5 billion vehicle early next year. For its part, Hamilton Lane tapped its managed accounts and fund-of-funds.

It is unknown if either firm will be involved in any subsequent secondary sales by the bank, or even when such an event may occur. There are market rumors that the firm sold off an additional $100 million in interests around the same time as the $1 billion deal, although Chase did not return repeated calls for comment on this story.

“My guess is that if Chase or anyone else does something next year, it won?t be quite as large as this deal was,” Harris said. “It will more likely be in the $500 million to $750 million range, although that is just speculation.”

Dan Primack can be contacted at Story Feedback.