Pomona Capital and ING Furman Selz Asset Management, the wholly owned asset management subsidiary of the Netherlands’ ING Group, joined forces last week in a strategic relationship designed to create a global private equity fund-of-funds business.
Pomona Capital is a New York-based venture firm that avoids direct investments in private companies. Instead, it is a fund-of-funds manager, investing in both primary and secondary limited partnership interests.
It is also an opportunistic firm whose new relationship with ING is set to capitalize on a impending sense of doom among private equity investors, said Michael Granoff, chief executive officer with Pomona. The partnership will provide both firms with access to capital and resources needed to cash in on what Granoff called the increasing need for liquidity in the private equity market.
For example, Chase Capital Partners announced three weeks ago it was restructuring its $5 billion portfolio and would sell off $2 billion of limited partner interests (See PEW, Oct. 9, pg. 11). That, said Granoff, is an indication of things of come.
“Lots of people are over-allocated in private equity,” he said. “People have made huge forward commitments to private equity funds, but fund returns are slowing. People are going to be looking to get out.”
The partnership is an exclusive long-term relationship between ING and Pomona for ING’s fund-of-funds and secondary private equity interests. Pomona will be the platform through which ING develops these businesses. Pomona will have access to ING’s capital and global reach, as well as its expertise in securitization and bridge financing.
Although Pomona will continue to operate its business autonomously, ING will source deals for Pomona. ING had no previous fund-of-funds or secondary interest operations. The agreement will not affect ING’s own private equity business or its capacity to invest in other venture funds.
Meanwhile, Pomona is in the midst of closing its third fund-of-funds, a $200 million investment vehicle that is expected to hold a final close early next year. The fund has already secured stakes with Menlo Ventures, New Enterprise Associates, Providence Equity Partners Inc. and Sevin Rosen Management Co.. At the same time, Pomona plans to begin raising a fourth secondary interest fund by year-end.
Currently, the New York-based venture firm has approximately $650 million under management in two fund-of-funds and three secondary interest funds. It has limited partner stakes in funds managed by CMGI @ Ventures, Clayton, Dubilier & Rice, Sprout Group and E.M Warburg, Pincus & Co.