Portfolio Advisors Offers Choice On Fee Levels

The latest incarnation of Portfolio Advisors‘ globally diversified private equity fund-of-funds, Portfolio Advisors Private Equity Fund VI, is offering limited partners a choice of fee schedules and a menu of allocation choices.

According to Fresno County Employees’ Retirement Association board documents, Darien, Conn.-based Portfolio Advisors offers two fee schedules, series I and series II, with the main difference being whether or not the LP chooses to pay performance allocation, or carried interest, on potential returns.

In series I, which has no performance allocation, the management fee is 0.625 percent in years one to three and 0.50 percent after that, based on a commitment of $25 million or more. With a commitment of up to $25 million, the management fee is 0.875 percent in years one to three and 0.70 percent afterwards.

In series II, which includes a 5 percent performance allocation, the management fee is 0.375 percent in years one to three and 0.30 percent thereafter, based on a pledge of $25 million or more. With a commitment of up to $25 million, the management fee is 0.625 percent in years one to three and 0.50 percent thereafter. The 5 percent performance allocation applies to net gains but is payable only after a 100 percent return of committed capital, plus an 8 percent preferred return.

Fees decline throughout the life of the fund for both schedules. After year seven, fees are based on the lower of the capital commitment or NAV.

Portfolio Advisors is seeking $900 million for its latest vehicle, which was launced in June 2008; as of February, the firm had gathered $290 million. In mid-August, the Temple (Texas) Firefighters’ Relief and Retirement Fund committed $2 million to the pool. The firm’s prior vehicle, Fund V, was raised between 2007 and 2009 and it closed in June with slightly more than $1 billion in pledges.

Like its predecessors, Fund VI is “menu-driven,” allowing investors to choose a customized allocation among three fund-of-funds strategies – buyouts, diversified venture capital and special situations. Within the special situations category, investors may choose from two sub-sector funds – diversified special situations and distressed. Each investor may allocate to one or all five sectors according to their investment objectives.

Fund VI’s distressed sector will commit to eight to 12 managers, including those using distressed debt trading, distressed debt for control and turnaround strategies. Slugs will go to funds with targets of $150 million to $250 million.

Portfolio Advisors typically invests in about 10 percent of the deals it reviews annually.

Past backers of the Portfolio Advisors Private Equity Funds include the Community Foundation in Jacksonville, the Community Foundation Of Greater Des Moines, the Doris Duke Foundation, the San Jose Police and Fire Retirement Plan, MetLife, the Pension Fund of the Christian Church, Sentinel Trust, Texas Treasury Safekeeping Trust, United Parcel Service, Utah Retirement Systems, various family offices and Verizon.