Bear Stearns Private Equity, a London-listed fund of funds managed within the US bank, plans to substantially increase its firepower by raising up to $400 million of additional capital on the London Stock Exchange.
The listed investment trust’s third fundraising effort, launched this morning, will see it look to cash in on its recent strong performance with a placement that will raise between $250 and $300 million – and possibly as much as $400 million.
The trust, which has invested $150 million in the last 18 months, believes it can put these funds to work in just nine months – a clear sign of confidence in the strength of its current pipeline.
The net asset value of its ordinary shares had appreciated by 42.2 percent by the end of last year, representing an average annual return to investors of 26.4 percent.
Director Troy Duncan said BSPEL offers private equity investors liquidity and access to a diversified portfolio, while trying to reduce the J-curve – the typically back-ended return profile of most private equity investments. It does this by focusing on never raising more money than it needs, usually following an over-commitment policy, and by deploying its funds very quickly. “Cash drag is the biggest mistake you can make,” Duncan told PEO. “Our investment strategy is focused almost exclusively on secondaries, to try and reduce the J-curve.”
BSPEL’s main focus is on buying private equity fund interests on the secondary market; it has almost three quarters of its money in buyout funds, 14 percent in venture and the rest in real estate and distressed debt vehicles, mostly in Europe and the US.
However, it can also buy primary interests, particularly if it facilitates a secondary or co-investment transaction, if it seems useful for diversification, or if it helps to deploy money more quickly. About 11 percent of the fund’s total was invested in primary interests at the end of last year.
The fund also makes occasional co-investments on specific deals if the opportunity arises, although these also account for a relatively small proportion of net assets – about 15 to 20 percent.
BSPEL offers investors increased liquidity by offering to buy back up to 15 percent of its shares every year.
The placement will begin on April 17 and is expected to be concluded by April 25.