ING Group, through its ING Furman Selz Asset Management subsidiary, and Pomona Capital announced a strategic partnership in mid-October aimed at the formation of a large global private equity fund-of-funds platform within the ING Group. ING will acquire a majority holding in Pomona in two tranches, while the balance will remain in the hands of the Pomona team. Financial details of the transaction have not been disclosed.
Pomona, an independent firm set up by chief executive officer Michael Granoff in 1994, manages more than $600 million in secondary and primary fund-of-funds. The company owns a portfolio of around 100 positions in leading funds with underlying interests in more than 400 companies.
Despite the change in its ownership status, Pomona will continue to operate as an autonomous entity. “The key to the ING deal was Pomona’s recognition that the world is changing. We wanted to make sure we remained in control of our own destiny,” says Michael Granoff.
“We have developed a good machine for making primary and secondary fund investments but, looking at private equity market developments overall, we needed to amass more capital, reach and resources while retaining our autonomy. This deal allows us to do that.”
The secondary market, Pomona maintains, is probably more dynamic than any other alternative assets sector at the moment. “This is an inflection point in the cycle where investing institutions really need liquidity,” explains Granoff. “We want to be sure of being able to do the deals we want to do. Recently there has been a change in the relative strength of buyers and sellers, and Pomona wants to get more than its fair share of the deals out there.”
In the secondaries arena, Pomona has a strong preference for non-auction deals, and 11 of the firm’s last 13 transactions have been non-competitive situations. Through the partnership with ING, Pomona is expanding its reach to source and execute such deals.
Any potential partner for Pomona, says Granoff, had to satisfy three criteria: it has to have global reach and capital access; be without an existing private equity fund business; and be prepared to allow Pomona to retain complete autonomy.
“ING met these criteria in spades,” Granoff says, going on to stress the point that ING was as anxious as Pomona itself that the firm should continue to operate totally independently. “Autonomy was not a negotiated point,” he added.
By linking up with Pomona, ING has gained a strong base in the private equity fund-of-funds and secondaries markets. As well as investing in future Pomona vehicles, ING will constitute a significant source of distribution to funds. Pomona, meanwhile, will provide access to funds from high-performing teams, which are often closed to new investors, to ING and its affiliates and clients.