Partners Group Adds to War Chest with $1.25B Secondary Fund

Partners Group has added its name to the growing list of players that have raised a secondary fund this year. The Baar-Zug, Switzerland-based funds-of-funds manager closed its second dedicated secondary fund, Partners Group Secondary 2006, with $1.25 billion (€1 billion) in commitments.

Partners Group invests in European secondary transactions, and prefers to buy interests in young funds between two and four years old and with 40% and 70% of their capital drawn.

Executives at Partners Group say they could have raised significantly more than the $1.25 billion cap–a sign of continuing demand by investors for secondary partnerships. However, the firm decided that $1.25 billion was plenty given the two to three year time-frame it expects to invest the fund in, according to a spokesman. Earlier this year, the firm held a $363 million(€300 million) first closing on the fund, a sum that was quickly raised from prior investors in order to have cash on hand for new deals (see Buyouts, Apr. 3, 2006). The firm has completely invested its premier dedicated secondary fund, Partners Group Secondary 2004, a vintage year 2003 fund that closed in 2004 with $609 million (€500 million).

One confirmed limited partner in the new fund is the San Bernardino County Employees’ Retirement System, which approved a $40 million commitment in mid-March. Otherwise, the roster of LPs for the fund includes “the usual suspects,” according to a Partners Group spokesman, namely banks, corporate pension plans, public pension plans, endowment funds, insurance companies and trusts. LPs in the first Partners Group secondary fund include BP, Canada Pension Plan Investment Board, MetLife and New York Life. The second fund did accept new LPs, but the firm was very selective in who it let in and did not go too far beyond a preferred set of core LPs, the spokesman says.

German-speaking European investors make up the largest share of LPs in the new fund, followed by U.K.-based investors and U.S.-based investors. The latest partnership has a geographically more diverse group of backers than the firm’s premier secondary fund, which was dominated by continental European and U.S. investors.

Partners Group Secondary 2006 joins a parade of secondary funds that have been raised this year. London-based Coller Capital has closed on at least $1.437 billion for its latest dedicated secondary fund, Coller International Partners V; with a target of $3.75 billion, that partnership aspires to be the largest ever dedicated secondary fund (see Buyouts, Oct. 9, 2006). Earlier this year, New York’s Lexington Partners closed on Lexington Capital Partners VI, the largest dedicated secondary fund raised so far with $3.5 billion.

Other significant secondary firms raising funds include London-based Pantheon Ventures, which is seeking as much as $2 billion for Pantheon Global Secondaries Fund III. San Francisco’s Paul Capital Partners is believed to be seeking $1 billion or more for Paul Capital Partners IX. And New York-based AIG is raising a $500 million private equity fund that has a secondary investment component; according to SEC documents, AIG PEP IV Secondary has closed on approximately $102 million.

Partners Group is one of the world’s largest asset management companies. It has almost $9 billion (CHF11 billion) in assets under management, including more than $7 billion in hedge fund and private equity assets. The firm is headquartered in Baar-Zug, Switzerland, and has offices in New York, London, and Singapore.— M.S.