Joining the crowd of private equity secondary buyers in the fundraising market, Partners Group may raise up to $1.2 billion (€1 billion) this year for its latest secondary fund. The Zug, Switzerland-based secondary buyer and private equity giant quickly held a first close in order to have capital on hand for deals after quickly burning through its last fund.
The new fund, Partners Group Secondary 2006 Fund, held a first close on $363 million (€300 million) that was raised from existing investors. The firm has completely invested its inaugural secondary fund, which it closed in 2004 with $607 million (€500 million).
Partners Group Secondary 2006 Fund has a target of $968 million (€800 million) and a hard cap of $1.2 billion (€1 billion). The new fund will have a 10% carried interest rate and a 125 basis points management fee.
Partners Group is focused on European secondary transactions with a preference for buyout assets in what the firm calls “manager secondary” funds, which are funds between two and four years old with 40% to 70% of their capital drawn.
It is unclear if the size and scope of its deal will change with this larger fund, but the firm maintains that it will still pursue secondary deals outside of the large auctions that have come to characterize much of the increasingly large secondary space. “As usual we don’t necessarily compete in the big auctions,” says Alfred Gantner, the firm’s founding partner and executive chairman. “We very much execute our secondary strategy among our corporate portfolio of 150 GP relationships. We focus on funds we know in detail where we have a very good grip on the portfolio composition rather than compete in the big transactions that the pure big secondary players dominate.” He says that the fund’s deal size would range from assets valued at a few hundred thousand dollars up to a few hundred million dollars.
Partners Group expects to hold a final close on the new fund before mid-year and Gantner says he expects the fund raising to go very quickly. “I expect a very significant portion of the fund being taken up by existing investors,” says Gantner.
So far one limited partner confirmed for the new fund is the San Bernadino County Employees’ Retirement System, which approved a $40 million investment in the fund in mid-March.
Limited partners in Partners Group previous secondary fund include BP, Canada Pension Plan Investment Board>, MetLife and New York Life. Other U.S. investors in that fund included other insurance companies and state pension funds. The largest segment of the first fund’s LPs, 45%, are from continental Europe. American LPs account for 30% of the investors in the fund. The United Kingdom and Scandinavia account for 10%, and 15% of the fund’s LPs are drawn from other geographic areas.
LPs have been generously invest in secondary funds. New York-based secondary buyer Lexington Partners is expected to close on a record-setting $3 billion fund soon and Simsbury, Conn.-based secondary stalwart Landmark Partners is expected to raise up to $1 billion for Landmark Equity Partners XIII. London’s Coller Capital is expected to seek at least $4 billion for Coller International Partners V this year. And earlier this year, New York-based Lehman Brothers closed its inaugural secondary fund with $800 million.
Partners Group is one of the world’s largest asset management companies and has almost $9 billion (CHF11 billion) in assets under management and more than $7 billion in hedge fund and private equity assets under management. The firm is headquartered in Zug, Switzerland and has offices in New York, London, and Singapore. —M.S.