Partners Group, the Zug-headquartered alternative asset manager, is planning to raise a E400m fund to acquire privately negotiated interests in existing private equity partnerships from sellers worldwide. Fundraising is already under way and a E100m first close is scheduled for October.
“We are hoping to attract existing and new investors to the fund,” said Stephan Schaeli, head of secondaries and portfolio management at the Swiss firm. “We are also hoping to attract new entrants to the secondaries market who like the growth opportunity.”
According to Schaeli, Partners Group Secondary LP will focus on “manager secondary” investments in private equity partnerships that are typically less than 70 per cent invested and which are generally two to five years old. These younger funds are generally still in the J-curve phase, and significant write-ups in net asset value have typically not yet occurred.
One often cited advantage of entering a partnership several years down the line is that it enables investors to join a fund at a more developed stage. In addition, management fees are avoided for the earlier years of the fund. “If you join later, it may even be possible to get a discount on subsequent management fees,” said Schaeli.
“Some of the larger buyout funds which have been raised over the past five years have attracted up to, and sometimes more than, 100 investors,” according to Schaeli. “There is a likelihood of turnover of these investors and we are aiming to be a provider of liquidity. A number of investors which joined the market between 1998 and 2000 don’t want to be there any more for a range of reasons. We will aim to tackle these issues.”
Schaeli said he expected most of the competition for this type of secondary transactions to come from traditional primary fund of funds, although he believes that the Partners fund will be able to move quicker than its rivals. “Every LP is potentially a competitor, although many firms will not have the capacity to execute deals quickly, especially if they are not sure about pricing.”
The firm is expecting to close the fund, which is capped at E500m, in mid-2004.