HarbourVest provides special co-investment access for big spenders to flagship secondaries fund

HarbourVest Partners is offering a sweetener for limited partners who kick in $100 million or more to its flagship secondaries pool, which is targeting $12 billion.

The firm, which is raising its 11th secondaries fund, is targeting $2 billion for its fifth co-investment fund, which will invest alongside Dover XI. The firm raised $1.5 billion so far, only from investors who committed at least $100 million to the flagship fund.

GPs are employing various strategies to attract capital in the challenged fundraising markets, including using co-investment access as an incentive. HarbourVest has also offered a management fee discount of five basis points to LPs who committed to Dover XI by early December 2022, Buyouts previously reported.

It’s not clear if HarbourVest has limited access to past iterations of the co-investment pool, called Secondary Overflow Fund V.

Meanwhile, HarbourVest has collected about $4.8 billion for the 11th flagship secondaries fund, which it expects to close in December. The ambitious fundraise is happening in a difficult environment as many institutional investors have trimmed pacing plans in recent months due to overallocation issues, liquidity fears and worries about the market.

Details about Dover XI and HarbourVest’s Secondary Overflow Fund V were included in board documents for Connecticut Retirement Plans and Trust Funds’ investment advisory committee meeting on May 10.

Buyouts reviewed the documents, which included information from Connecticut’s investment staff and presentations from adviser Hamilton Lane and HarbourVest.

Connecticut is considering making a $175 million commitment to each fund. If the commitments are approved, Connecticut would gain an LPAC seat for Dover XI, according to the documents.

SOF V charges no management fees or carried interest, according to the documents.
Dover XI has an 8 percent preferred return and a 12.5 percent carried rate that pays out at the end of the fund life after LPs have been paid back; HarbourVest will kick in a 1.5 percent GP commitment, according to the documents.

According to Hamilton Lane’s review of Dover XI, HarbourVest is expected to make equity investments between $200 million and $400 million, and the fund will likely hold more than 3,000 underlying companies.

HarbourVest plans to allocate between 60 percent and 70 percent of Dover XI’s portfolio to complex transactions. Dover XI plans on making its first distribution after its final close, according to the documents. HarbourVest also intends to use a credit facility between capital calls and expenses.

Both Dover XI and SOV V have 10-year terms with HarbourVest, and have the option of four one-year extensions.

HarbourVest declined to comment for the story.