Capping a banner year for fund-raising for the secondary private equity market, Credit Suisse First Boston closed on two secondary funds for a combined $1.9 billion.
CSFB Strategic Partners II, which will seek positions in buyout and mezzanine funds, closed with $1.6 billion, which was over its initial goal of $1.25 billion. The investment banking giant also closed on CSFB Strategic Partners II RE, a $300 million co-investment fund focused on secondary real estate investments.
Documents that the firm filed with the Securities and Exchange Commission in April list the fund as having 50 limited partners in its two funds. But CSFB has named only one limited partner, the Pennsylvania State Employees’ Retirement System.
The two funds have so far called down 30% of their capital and made more than 70 purchases of partnership interests in buyout and real estate funds. The funds have a four-year investment period.
The Strategic Partners group was founded in 2000 and has invested more than $2 billion in the secondary market in over 100 deals. The group’s deals range from $100 million to $500 million in value in funds that are usually about five years old. CSFB closed its first secondary fund, DLJ Strategic Partners, in 2000 with approximately $832 million in committed capital. The fund is fully invested.
The new CSFB fund is the third largest dedicated secondary fund ever raised and is the latest secondary investor to bring a large fund into the market. In July, Lexington Partners announced it closed Lexington Capital Partners V with $2 billion. Late last year, Coller Capital closed the record-setting $2.6 billion Coller International Partners IV.
And the wave of top-tier fund-raising is far from over. Paul Capital Partners has launched its effort to raise Paul Capital Partners VIII. The San Francisco-based secondary firm expects to close on $800 million. Meanwhile, Pantheon Ventures is raising its next dedicated secondary fund with a goal of $600 million.
Peter Holden, managing partner with research firm Columbia Strategy, says CSFB’s closing is another symbol of a changed secondary market. The secondary market, he notes, has expanded well beyond venture capital towards buyouts and mezzanine as part of the secondary market.
“[CSFB’s fund] shows that there are still opportunities and there isn’t a perception that it’s a saturated market,” he says.
“When these funds set up secondaries now, they look at alternative asset classes beyond venture capital to include buyout portfolios, and even mezzanine and debt portfolios,” Holden adds. The new CSFB funds have only invested in one or two venture capital deals.
While the secondary market has yet to see the level of deal flow to match its record fund-raising, CSFB took part in two of the four large secondary private equity deals announced this year.
The firm purchased most of the portfolio of Switzerland’s Private Equity Holding for $470 million, using its DLJ Strategic Partners fund. CSFB also purchased about 30 private equity portfolios from Deutsche Bank for approximately $500 million.