HarbourVest Partners has acquired the BAML Capital Access Funds (BAML CAF) group from Bank of America Merrill Lynch, to form a business unit within HarbourVest, the firm’s managing director John Toomey told Private Equity International.
BAML CAF manages only separate account mandates that focus on making primary and secondaries investments in emerging and diverse fund managers.
Toomey said this is the first management company acquisition by HarbourVest, other than the firm’s spin-out from John Hancock Insurance subsidiary Hancock Venture Partners in 1997. Otherwise, the firm has traditionally grown organically.
While the transaction details remain undisclosed, he said the acquisition involved assuming the management of separate account mandates of clients, bringing the team onboard and buying any economic interest the bank had as a general partner in the separate accounts.
“We saw an opportunity to bring on a team that, for the last 10 years, has really created a leadership role for this end of the private equity market,” Toomey told PEI. “We thought it would be a terrific opportunity for us to expand the types of offerings we have for our clients. Importantly, this came together for us because the team itself was culturally consonant to HarbourVest.”
Founded in 2002, BAML CAF is managing $1.9 billion in committed capital, focusing on emerging and diverse fund managers. Its assets include several separately managed accounts on behalf of large state pension funds. One of the separate accounts managed by BAML CAF is NYSCRF Pioneer Partnership Fund II, which closed in 2015 with a $300 million commitment from the New York State Common Retirement Fund, according to PEI’s Research & Analytics division.
Following the acquisition, BAML CAF will be called HarbourVest Horizon while maintaining its existing investment focus of seeking emerging managers raising first, second and third funds, diverse managers led by women or minority general partners in the lower mid-market and in underserved markets.
Toomey said Horizon is exclusively organised around separate accounts, but that an expansion of the investor base into smaller pension funds at the state, county and local levels could mean a co-mingled fund may become possible. “I can certainly see that type of product offering in the future, but there are no imminent plans,” he said.
He added that one of the reasons why the team had an interest in becoming part of HarbourVest, he believes, was the firm’s expertise in the secondaries and direct investment realms.
“I see people in the market similar to us abandoning the multi-manager format,” he said. “Our core business is this format, such as fund of funds, separate accounts, secondary businesses and direct or co-investing. Instead of abandoning those formats, we are embracing them.”
The group’s six professionals, including managing directors Craig Fowler, Matt HoganBruen, Edward Powers and Sanjiv Shah, will become part of the HarvourVest team. The four managing directors will remain in their respective cities of St. Louis, Washington DC, New York and Chicago, working remotely and in close proximity to potential smaller investors, and will travel occasionally to HarbourVest’s Boston office. The two vice presidents will relocate permanently to Boston from Chicago, Toomey said.
HarbourVest Horizon seeks to “identify promising fund managers and connect women- and minority-led business with sources of capital,” according to the HarbourVest website.
HarbourVest manages $39 billion in assets, having committed over $30 billion to newly formed funds and $13 billion to secondaries purchases.