The New York-based firm raised $821 million for its previous secondary fund, Pomona Capital VI, which closed in 2005.
About 20% of Pomona Capital VII has already been invested, Granoff said. The manager of secondary funds, funds of funds and equity co-investments has bought interests in about 40 funds, using fund VII capital, he said. Most of its secondary investments are six to seven years old and almost 80% funded, he added. The lion’s share of the new fund’s investments are in smaller and mid-market buyout funds.
In addition to the copious amounts of fund interests available on the secondary market, Granoff said his firm is also looking at opportunities to acquire secondary interests in direct equity co-investments.
Noting the rising interest now in secondary funds, Granoff said, “The world has changed dramatically. This is the first time that we had people cold-calling us to ask if they could invest in the fund.”
Granoff noted that Pomona Capital has been flooded with new secondary deal opportunities.
“Last year we looked at over $40 billion in deal flow,” he said. “This year we are on track to look at maybe $100 billion in deal flow.”
Institutional investors, such as Harvard University’s endowment, which was never a big seller on the secondary market, along with other significant endowments, financial institutions, pension funds, corporations and family groups have become notable sellers of private equity interests, Granoff said. Endowments have liquidity issues because many have huge unfunded commitments to private equity that render them vastly over-allocated to the asset class.
While it’s widespread in the United States, this phenomenon is also taking place in Europe, Granoff said. Pomona Capital has offices London and Hong Kong to help it source deals. About 75% of the firm’s holdings are based in the United States, with the remainder domiciled in Europe. —Nancy Gordon