Banner Ridge Partners, launched last year by the former head of Siguler Guff’s secondaries group, has wrapped up its inaugural fund, raising $550 million.
Banner Ridge Secondary Fund III closed last week at its hard cap, exceeding a $350 million target after only four months of marketing, Managing Partner Anthony Cusano told Buyouts. Banner Ridge also collected $100 million for an over-allocation vehicle, he said.
Fund III’s limited partners included about 20 institutions, Cusano said, among them family offices, public pension plans and registered investment advisors. New Mexico Educational Retirement Board disclosed a $100 million commitment, as well as $40 million for a second side-car pool.
New York-based Banner Ridge was founded in mid-2019 by Cusano and Partner C.J. Driessen, both Siguler Guff veterans. Cusano worked at Siguler Guff for nine years as a managing director, leading the start up and development of the firm’s secondaries strategy through a series of pre-fund deals, separate-account funds with New Mexico ERB and a $337 million commingled fund.
Over time, Cusano’s team committed more than $1 billion to opportunities involving about 80 managers focused on distressed, special situations and credit strategies globally.
New Mexico ERB reported its first and second separate-account funds with Siguler Guff as generating net IRRs of 44.7 percent and 23.7 percent, respectively, as of June 2019. The $337 million fund had a net IRR of 47.8 percent as of December 2019, Siguler Guff reported via Preqin.
Cusano, who left Siguler Guff last March, said Banner Ridge was created to leverage this track record with benefit of a larger dedicated pool and expanded team. Fund III will follow a similar niche strategy as the Siguler Guff vehicles, he said, buying LP stakes in funds overseen by distressed private equity, hedge fund side-pockets and out-of-favor managers worldwide.
Secondaries deals will account for at least 70 percent of Fund III’s activity, Cusano said, with primary investments and co-investments making up the balance. Transaction sizes are expected to range from less than $1 million to more than $150 million.
Digging for value
Cusano said Banner Ridge’s edge in a fast-growing secondaries market lies in the credit orientation and experience of its investment team, which can selectively source opportunities in a specialized area by tapping into information and relationships. “We know how to dig for value in this space,” he said.
Upon completing acquisitions, the team will actively manage portfolio assets, Cusano said, making regular checks to determine whether or not to sell a position.
Along with Cusano and Driessen, Banner Ridge’s team includes the other former members of Siguler Guff’s secondaries group: Principal and CCO Scott Halper and Investment Associate Andrew Wu. In January, the firm was also joined by Managing Director Robert O’Connor, previously a senior executive with Drum Capital Management and Protostar Partners, bringing the number of professionals to eight.
Fund III has already committed $68 million to 13 deals, Cusano said. Going forward, it is expected to deploy $100 million to $150 million per year.
Cusano, 36, is among the youngest heads of a secondaries firm. Prior to going to Siguler Guff in 2010, he was with the distressed research team of StepStone Group and, before then, worked with Cornell Capital Partners. Cusano also owned and operated a San Diego IT consulting business, acquired in 2007.
Despite a bit of a lag at year’s end, activity in the global secondaries market reached an all-time high in 2019. The volume of completed transactions came in between $80 billion and $85 billion, according to reports by Evercore and Setter Capital. Respondents to Setter’s survey said they expect volume to top $89 billion in 2020.
Action item: See Banner Ridge Partners’ ADV filings here.