Portfolio Advisors Halfway To $1B For Secondaries

Firm: Portfolio Advisors LLC

Fund: Portfolio Advisors Secondary Fund II LP

Target: $1 billion

Amount Raised: $487.9 million

Portfolio Advisors Secondary Fund II listed $455.2 million in sales, plus an additional $32.7 million in an offshore feeder fund, for a total of $487.9 million, about half way toward its $1 billion target, on the heels of impressive returns from its predecessor vehicle.

The 2008 vintage Portfolio Advisors Secondary Fund LP earned an internal rate of return of 20.2 percent as of Dec. 31, 2012, according to data from the Montana Board of Investments compiled by Buyouts. That fund raised $1.1 billion, $100 million ahead its target, with commitments from Montana as well as the San Francisco City and County Retirement System.

Paul Crotty, managing director of Portfolio Advisors, declined to comment.

Employee-owned Portfolio Advisors traces its roots in secondary investing to 2003, when it began purchasing select individual LP commitments and pools of secondary interests on behalf of its fund-of-funds vehicles and certain advisory clients, according to the firm’s website. All told, Portfolio Advisors has tallied about $1 billion of secondary transactions involving more than 300 partnerships.

Among other secondary funds in the market this year, HarbourVest Partners LLC tipped the scales with the $3.6 billion Dover Street VIII LP, which closed July 10, above its $3 billion target. Dover Street VIII will make secondary investments in venture capital, leveraged buyout and other private equity assets, as well as portfolios of operating companies, manager spin-outs, and structured transactions, HabourVest said.

Also this summer, RCP Advisors closed RCP Secondary Opportunity Fund II with $425 million.

One sweet spot for secondary investing: buying LP interests at a discount to their net asset value in the fund. Purchasing access to more seasoned funds also speeds up cash flow paybacks, compared to start-up funds that take longer to generate returns.