Kline Hill, specialist in small secondaries, closes Fund II on hard cap

  • Firm: Kline Hill Partners
  • Fund: Kline Hill Partners II
  • Target $300 mln
  • Hard Cap: $350 mln
  • Amount Raised: $357 mln

Mike Bego, who founded Kline Hill Partners in 2015, said fundraising never really ends, especially for a first-time fund manager.

Bego, a former partner at Willowridge Partners, closed his debut fund on $180 million in 2016 and got down to investing. But it doesn’t take too long to start thinking about the second fund.

“You always need to be fundraising. The dust settles on a fund and you’re pretty quickly” thinking about the next fund, Bego told Buyouts in a recent interview.

Kline Hill successfully made that transition into its sophomore pool, a critical moment for a new firm.

It shows that performance at least looks strong (even if returns have not yet been realized) and that the strategy continues to garner support from limited partners. Performance on Fund I wasn’t immediately available.

The Greenwich, Connecticut, firm closed Fund II on its $350 million hard cap, for a total of $357 million including the commitment from the GP.

Few firms pursue a strategy like Kline Hill’s, in which it seeks out deals in the smallest side of the secondaries market, typically purchasing commitments in the single-million-dollar range. The firm targets primarily buyout and venture funds but may pick up stakes in energy, real estate and other private market funds as well.

Of the estimated $55 billion of total secondary volume in 2017, Bego said, probably 10 percent is in the small end of the market, meaning deal flow of about $4 billion to $5 billion a year there.

Kline Hill found deal flow in buying out tail-end interests in funds-of-funds that are closing out, as well as sales of LP stakes from smaller institutions. The firm has started investing Fund II, Bego said.

“We’ve closed over 10 different fund-of-funds terminations in the past 18 months; over 350 different individual [underlying] funds,” Bego said.

The larger Fund II won’t push Kline Hill out of its strategy, Bego said. The firm will be able to do more deals. And as the fund size grew, so, too, will Kline Hill’s staff. The firm is hiring at least four new members of the deal team, Bego said.

One new hire is Kathryn Cholko, an auditor at Deloitte. Cholko will join Kline Hill soon as an associate, Bego said.

Other executives at Kline Hill include Partner Jared Barlow, VP of Finance and Operations Danielle Buccola, and Associates Graham Douglas and Thomas Melly. The firm is advised by Priya Pradhan Karkar, former head of PE secondaries at Cambridge Associates.

Action Item: Check out Kline Hill’s Form ADV here: https://bit.ly/2HDK0z6

Photo of Mike Bego courtesy of Kline Hill Partners