Pomona Capital looks to hit $3bn for its latest secondaries fund

Pomona Capital is seeking $3 billion for its 11th flagship secondaries fund, a $400 million increase from its prior pool.

Secondaries fundraising has been on fire, with a record $117.9 billion raised for the strategy last year.

Details about Pomona Capital XI were included in documents for the Illinois Firefighters’ Pension Investment Fund’s investment committee meeting held on January 26. Buyouts reviewed these documents.

Illinois Firefighters committed $200 million to Fund XI, with $30 million of that allocated to a co-investment.

According to documents prepared by consultant Meketa, Pomona Capital has a $3 billion target for its latest fund. Its predecessor closed at $2.6 billion in 2020.

Fund XI will charge a 1.125 percent per-annum management fee for the investment period, along with a 12.5 percent carry with an 8 percent hurdle, Meketa said.

Illinois Firefighters co-investment will not be subject to any management or incentive fees, according to Meketa.

Pomona Capital is eyeing between 30 and 40 secondaries transactions through funds that are five to seven years into their lives and between 70 percent and 90 percent funded, Meketa data reveals.

Fund XI will have a targeted buy list of 15 funds per quarter, according to Pomona Capital’s presentation.

The average secondaries transaction size for Fund VIII through Fund X was $60 million, according to Pomona Capital. Its largest transaction was $750 million.

Public and private pensions make up 32 percent of LPs in Pomona Capital secondaries funds, the manager said.

Known commitments from Fund X came from Chicago Firemen Annuity & Benefit Fund, Oklahoma Firefighters Pension & Retirement System and the Edgerton Foundation, according to Buyouts’ database.

According to Pomona Capital, Fund X has earned a net IRR of 30 percent with a net DPI of 18 percent. The 2016 vintage Fund IX has earned a 24 percent net IRR and 105 percent net DPI.

A 2021 co-investment offered to LPs named Project Patriot earned a 23 percent net IRR with 41 percent net DPI, according to Pomona Capital’s presentation.

Project Patriot’s size was $353 million and contained 45 funds with 225 underlying companies. Managers of Project Patriot’s funds include Thoma Bravo, Apollo, L Catterton and Sun Capital, according to the presentation.

Pomona Capital declined to comment for this story.

The $8.4 billion Illinois Firefighters pension was created in 2019 after legislative action by the state of Illinois. The system is in the midst of making its first private equity commitments to reach its 10 percent target allocation.

Other LPs starting private equity programs have also made secondaries commitments as they eye quick distributions for their coffers. Some examples include recent commitments from Arkansas Teacher Retirement System and Coral Gables Retirement System.

According to Meketa, 25 firms responded to an RFP for a secondaries manager. Managers who responded include Adams Street, BlackRock, Coller, Hamilton Lane, HarbourVest, Lexington and StepStone.

Illinois Firefighters also hired Adams Street to manage its core primary fund program as it further builds its private equity portfolio. Adams Street proposed a flat fee of $500,000 annually to do so, Meketa said.