Paul Capital To Seek Upwards Of $1B

Firm: Paul Capital Partners

Fund: Paul Capital Partners IX

Fund Focus: Secondaries

Target: Around $1 billion

Select Past LPs: BP Pension Fund, Coal

Pension Securities Trust, the CPP Investment Board

(CPPIB) and E.I. du Pont de Nemours & Co.

Paul Capital Partners may be the next group with a dedicated secondary vehicle to join the fund raising juggernaut currently rolling through the private equity world. The firm is investing its eighth dedicated secondary fund at a faster pace than expected and could potentially begin marketing its ninth secondary effort by this summer, Buyouts has learned.

The firm’s current dedicated secondary fund, the $960 million Paul Capital Partners VIII, is approximately 65% invested. The firm expects to be 75% invested sometime over this summer and anticipates to begin marketing Paul Capital Partners IX around that time, according to a source familiar with the firm. While Paul Capital has not set an official target, it will likely be similar in size to Paul VIII and may exceed $1 billion.

Paul Capital Partners plans to stay in the middle-market with deals of between $25 million and $35 million. Paul Capital is largely sector and geographically agnostic, buying shares in buyout, mezzanine, venture capital and portfolios of direct interests in private companies. Most of the firm’s deals have been in North America and Europe.

Limited partners in past Paul Capital funds include BancBoston Investments, BP Pension Fund, the U.K.-based Coal Pension Securities Trust, the CPP Investment Board (CPPIB), E.I. du Pont de Nemours & Co. and the Howard Hughes Medical Institute, among others.

Paul Capital recently joined with the Goldman Sachs Asset Management private equity group and the Canadian Pension Plan Investment Board (CPPIB) in purchasing a $925 million private equity fund share from JPMorgan Partners‘ global fund. While Paul Capital’s investment was relatively small by comparison, deal insiders say the firm was instrumental in providing a leadership role and analysis. Previously, CPPIB and Paul Capital collaborated to form CPP Investment Board-Paul Capital Holdings II, a $310 million limited partnership managed by Paul Capital that acquires secondary portfolios.

Late last year the firm closed a new fund-of-funds, Paul Capital Top Tier Investments III, with more than $620 million. The fund-of-funds makes both primary and secondary investments in venture capital funds with a special focus on healthcare, technology and other growth sectors.

Paul Capital is also likely to be on the fundraising trail for Paul Royalty Fund III, its latest fund dedicated to buying royalties in products from medical and pharmaceutical companies. Its current fund, Paul Royalty Fund II, closed in 2003 with $657 million. Paul Capital will likely raise the new royalty fund with a target similar to its predecessor and will likely be in fundraising mode over the summer or beginning in the third quarter.

As of the end of last year, Paul Capital’s Top Tier Funds managed over $1.3 billion in committed capital, the Paul Secondary funds oversaw more than $2 billion and the Paul Royalty Funds managed approximately $1 billion. Paul Capital was founded in 1991 and has offices in New York, London, Paris, San Francisco and Toronto.

Like Paul Capital, other dedicated secondary funds are in the midst of a heavy fundraising drive. New York-based secondary buyer Lexington Partners has already closed on a record amount, with more than $2.75 billion in Lexington Capital Partners VI. It expects to have a final close with at least $3 billion. The Lexington fund tops the previous record set by London’s Coller Capital, which is expected to re-enter the market soon seeking at least $4 billion for Coller International Partners V. Switzerland’s Partners Group may also raise up to $1.2 billion (€1 billion) this year for its latest secondary fund, while Simsbury, Conn.-based Landmark Partners may raise up to $1 billion for Landmark Equity Partners XIII. — M.S.