Bear Stearns taps market for listed private equity

The US investment bank has raised $300m to invest in private equity secondaries.

Bear Stearns Private Equity, a London-listed private equity secondaries fund, has raised $308.9 million of fresh capital to invest, taking its assets to $495 million.
The US bank is capitalising on increasing institutional demand for alternative assets.

Trevor Ash, chairman, said this round of fundraising, the fund’s third since launching in 2005 with a modest war chest of $58.2 million, allowed it to broaden its investor base further. It now includes pension funds, private wealth management groups, and discretionary asset managers from the UK, Europe, the Middle East, and Asia.

Net asset value since launch is up 42.2 percent, representing a 26.4 percent annualized return.

Troy Duncan, managing director and chief investment officer for the fund said: “The intention was to build it slowly, create a story and then tell the story, It was always important not to raise too much money.”

The fund’s strategy is to invest primarily in secondaries, taking stakes in existing private equity funds, to put the money to work as quickly as possible and mitigate holding too much cash on the books, which would hit performance.

Duncan said: “We have raised money to match our pipeline of opportunities and we will assess in six to nine months whether to raise more, depending on the market and what our board deems appropriate.” The fund describes this approach as just-in-time financing.

A portion of the fund is held for co-investment opportunities and for investment in primary deals to help the fund’s diversification or to improve its relationship with managers strategically.

The new shares begin trading on the London Stock Exchange with effect from 8.00 am on 2 May 2007.

Bear, Stearns International, HSBC Private Bank, JPMorgan Cazenove and Migdal Hitum Ve’Kidum Asakim acted as placing agents.  JPMorgan Cazenove acted as sponsor. 

The placing price of each new share is $1.53, or the net asset value per existing share, as estimated by the directors as at 31 March 2007 of $1.50, plus the estimated costs and expenses of the placement, estimated to be 1.9 percent of the proceeds.

The fund offers immediate exposure to a private equity portfolio that consists of over 53 funds and 800 companies, diversified by geography, investment strategy, and vintage year.  The portfolio is divided almost equally between Europe and the United States with some exposure to other markets such as Asia and the Middle East.

It principally invests in buyout strategies, but also makes selective venture, real estate, and private equity debt/mezzanine investments.