HarbourVest Partners held a final closes last Monday on a pair of $2 billion fund-of-funds that will invest within the U.S. One vehicle will focus on primary and secondary VC partnership interests, while the other will make similar plays within the domestic buyouts space. HarbourVest also is in the midst of raising a mezzanine fund-of-funds targeted at $1 billion.
Fund-raising on all three funds commenced in mid-2002, with intermittent closes being held along the way. Brooks Zug, a senior managing partner with HarbourVest, said that while the private equity markets have changed since his firm first charted its fund strategies particularly the venture capital market he’s 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,” said 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 buyout funds first called down capital in February 2002 and began investing. The buyout fund is currently 20% invested in primary partnerships managed by firms like GTCR Golder Rauner, Kelso & Co., Parthenon Capital, Silver Lake Partners and Texas Pacific Group. The VC fund also is 20% invested, in a portfolio that includes Domain Associates, InterWest Partners, Mayfield, New Enterprise Associates, Oak Investment Partners, Sevin Rosen Funds, Sequoia Capital and Three Arch Partners.
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.
Both the VC and buyout funds were oversubscribed, Zug said, adding that many limited partners were forced to pare down their commitment requests. He was unavailable to comment on SEC filings that show 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 approximately 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.