Large secondary buyers have caps on their funds for the benefit of their limited partners. But that hasnt stopped groups, such as Credit Suisse First Boston, from raising funds 10 times the size of the New York Yankees payroll.
The financial giants private equity group, CSFB Private Equity, expects to close its latest secondary fund, CSFB Strategic Partners III, with $2.4 billion.
CSFB Strategic Partners III is comprised of three separate funds or fund components: a $1.9 billion LBO vehicle, a $315 million real estate component and a $210 million venture capital fund. All three funds will begin their investment period on July 1; the firm says that several transactions are already in the works.
The fund marks CSFBs growing interest in venture. While still the smallest part of its investment activities, the group began to take a greater interest in venture with its second fund. Fund II saw direct portfolios make up only about 5% of its venture buys. But in fund III, the direct portfolio share will be about 20%.
Managing Director Stephen Can says that 90% of fund III has come from returning limited partners. They include the Pennsylvania Public School Employees Retirement System and the New York State Teachers Retirement System. Can says that CSFB added some endowments and universities, a few insurance companies and a lot of high net worth individuals to its LP roster.
CSFB gravitates towards lower risk buys and covers a wide range of transactions; its average deal size is between $20 million and $25 million.
CSFBs secondary group closed its first fund in 2001 with $832 million. Almost all of it was focused on LBO fund assets. Its second fund closed in 2003 with $1.9 billion in two underlying funds: a $1.6 billion LBO asset fund with a $300 million real estate secondary fund.
The secondary group is comprised of 18 transaction professionals working from offices in London, New York and San Francisco. The firm is considering opening an office in either Asia or Switzerland.