HarbourVest Partners held final closes last Monday on a pair of $2 billion funds-of-funds that will invest in the United States. One vehicle will focus on primary and secondary VC partnership interests, while the other will make similar plays in domestic buyouts.
Also, HarbourVest is raising a mezzanine fund-of-funds targeted at $1 billion. Fund-raising on all three funds commenced in mid-2002, with intermittent closes held along the way.
Brooks Zug, a senior managing partner with HarbourVest, acknowledges that the private equity markets have changed since his firm began charting its fund strategies – particularly the venture capital arena – but that he is still comfortable with the $2 billion capitalizations.
“You’ve had a downsizing of prior VC funds and new VC funds, but the secondaries market has picked up at the same time,” says Zug, who declined to discuss the mezzanine vehicle due to SEC solicitation restrictions. “So far, we’ve been pretty successful in acquiring secondary positions in VC partnerships in the U.S., including both traditional secondaries that are fully funded and others that are lightly funded and may be just 15% invested.”
Both the VC and buyouts efforts first called down capital in February 2002, and began investing at the same time.
Each fund is expected to invest between $200 million and $300 million per year with primary partnerships and another $100 million to $200 million with secondary purchases. Individual investment sizes can range from $10 million to $100 million.
Zug reports an over subscription for both the VC and buyouts funds, and that many limited partners were forced to pare down their commitment requests. He was unavailable to comment on SEC filings, which show that each fund was launched with a $3 billion maximum capitalization, but a source familiar with the situation says that HarbourVest never seriously entertained the thought of raising more than $2 billion per fund.
The combined funds received commitments from about 120 institutions, including 41 U.S. public and corporate pension funds, 24 U.S. endowments and foundations, four U.S. insurance companies and 51 institutions based in Europe and Asia.
Among the VC fund’s domestic limited partners were the Colorado Public Employees’ Retirement Association, New York State Teachers’ Retirement System, Mineworkers’ Private Equity Trust, Key Bank, The Dairy Farmers of America Retirement Plan, Brown & Williamson Tobacco Corp. Retirement Fund and The Sherwin-Williams Co. Collective Investment Trust.