HarbourVest raises its largest co-investment fund yet

The asset manager has already invested more than $500m from HarbourVest Partners Co-Investment IV.

HarbourVest Partners has held a final close on its largest-ever co-investment vehicle on its revised hard-cap of $1.75 billion.

The Boston-based private equity firm initially planned a ceiling of $1.5 billion for HarbourVest Partners Co-Investment IV, but raised it due to oversubscription, the firm said on Wednesday.

The vehicle’s original target, meanwhile, was $1 billion, but had to be raised to $1.5 billion due to strong investor demand, according to a statement.

The fund can invest in buyouts, growth equity or mezzanine debt, managing director Ian Lane said in the announcement. HarbourVest closed a mezzanine-specific co-investment fund, which raised $375 million, in April.

The co-investment fund received commitments from limited partners across the world, which included Australia, Colombia, South Korea, the UK and the US.

Among those allocations were the Michigan Department of Treasury ($100 million); Metropolitan Government of Nashville and Davidson County Employees’ Benefit Trust Fund ($15 million); Louisiana Municipal Police Employees’ Retirement System ($12.5 million), according to PDI data.

The Austin Fire Fighters’ Relief and Retirement Fund also set aside $10 million for the fund, according to December meeting minutes.

Co-Investment IV is a 10-year vehicle with three possible one-year extensions, according to documents from the Ventura County Employees’ Retirement Association.

The fund charges a management fee of 1 percent on invested capital for the first five years of its life that will decrease by 20 percent each successive year, the materials showed. The vehicle’s carried interest is 10 percent until investors have doubled their money, after which the carry increases to 20 percent over an 8 percent hurdle.

As of 1 May, the firm had deployed $513.1 million from the fund, with an additional $67.5 million of commitments pending, according to the VCERA papers. Investments in healthcare companies made up one-third of the fund. Commitments to the financial and services sectors made up the second largest portions of the portfolio with 27 percent and 17 percent, respectively. Almost three-quarters of the businesses were based in North America.

The largest commitments include two separate investments into Insight Venture Partners’ portfolio company Ministry Brands, a software company, totalling $81.1 million. Additionally, HarbourVest put $75 million, also across two separate deals, into ABRY Partners’ Acrisure, an insurance broker.

The previous co-investment fund, HarbourVest Partners 2013 Direct Fund, raised $1 billion, surpassing its $750 million goal, in April 2014, as Private Debt investor sister publication Private Equity International reported at the time.

In the VCERS documents, HarbourVest said it has returned a 19.7 percent gross internal rate of return on realised co-investments since 1989. The 2013 Direct Fund has produced a 1.4x total value multiple and a 20.9 percent net internal rate of return, as of 31 December, according to a document from the Oregon Public Employees Retirement Fund. The second co-investment fund, the $734 million HarbourVest Partners 2007 Direct Fund, produced a 1.62x total value multiple and a 10 percent net IRR.

HarbourVest invests in buyout and runs a fund of funds business, which invests in mezzanine and distressed debt vehicles as well as buyout, infrastructure and venture capital funds.