HarbourVest and UBS Seal Deal

Private equity firm HarbourVest Partners has sealed the long-rumored deal with UBS for a significant share of its private equity portfolio. The deal nets HarbourVest 52 limited partner interests in both venture capital and buyout funds. The commitments that UBS made in the portfolio total $1.3 billion.

UBS started an auction process for the deal about six months ago. The investments are deals that UBS made going back approximately three-and-a-half years. A source familiar with the deal said the LP interests are less than 30% drawn down and that the affect of the sale to UBS’ balance sheet will be approximately $350 million.

The secondary sale represents over half of the UBS private equity portfolio and consists predominantly of buyout funds. HarbourVest and UBS have formed a joint venture, named Tresser, to acquire the partnerships.

“This isn’t a purchase where we own the assets, but where we have a joint venture partner,” says Fred Maynard, managing director with HarbourVest. Tresser will be jointly managed, with HarbourVest acting as the general partner.

Maynard says he is hopeful of doing more deals like this.

“The secondary market is being forced to go with the large amount of capital that’s come into the sector,” says Maynard.

HarbourVest evaluated over $10 billion worth of secondary assets in the first nine months of 2003. This is up significantly from last year, which saw the team evaluate a total of more than $9 billion in 2002.

HarbourVest has already been able to close on over $500 million in secondary deals. The firm was a principal player in Deutsche Bank’s sale of $1.5 billion of private equity investments in a deal that created MidOcean Partners. HarbourVest committed $160 million to that transaction. Secondary advisory firm Columbia Capital reports HarbourVest has a total of $3 billion reserved for secondary deals.

Meanwhile, two weeks ago, HarbourVest announced the promotion of 11 of its 51 investment professionals. Five of those 11 investment staff members work closely with the firm’s secondary partnership group. Last month, the London Pensions Fund Authority (LPFA) announced that it is investing about $212 million into three private equity funds, including HarbourVest, which received $102 million from the UK pension giant.

Earlier this year, HarbourVest closed its Dover Street V fund, a dedicated secondary fund, with $515.2 million. HarbourVest, which is headquartered in Boston, has offices in London and Hong Kong. Since its founding, HarbourVest has invested $1.7 billion in secondary deals, put $8.4 billion in private equity funds and made $2 billion in direct investments.

On the flip side, UBS has taken heavy losses in its private equity investments and announced last year that it was reducing its exposure to the asset class.

The Swiss investment-banking firm, which recorded heavy losses in and out of its private equity portfolio, has sold off other assets as well. UBS agreed to sell its Correspondent Services Corp, a UBS PaineWebber division, to Fidelity Investments for an undisclosed sum in early April.

UBS is based in Zurich and Basel, Switzerland and has offices in more than 50 countries.

Email Matthew Sheahan