Zug, Switzerland-based alternative investment specialist Partners Group has closed Partners Group Secondary LP, the firm’s first dedicated secondary vehicle that was launched in September 2003. The oversubscribed fund was capped at €500 million ($617 million) but, according to a source close to the firm, attracted requests worth in excess of €800 million.
Before launch, Partners’ marketing experts positioned the fund carefully, labelling its target assets ‘manager secondaries.’
As defined by Partners, manager secondaries are interests in private equity partnerships that are between two and four years old and between 50 and 70 percent drawn down. The attraction? “Manager secondaries sit at the lowest point of the J-curve,” described Urs Wietlisbach, partner and co-chairman at the firm, the fund’s relative value approach in an interview with Private Equity International in August. “They are most likely to be mispriced, as many of the underlying assets will still be held at costs.”
Primary funds that Partners has already invested in and hence knows well are of particular interest to the new pool.
Banks, insurance companies and pension funds from Germany, Scandinavia, the UK and the US provided the bulk of the fund’s capital, Wietlisbach said, adding that €100 million of the capital has already been invested.
Limited partners in the fund include MetLife, BP, New York Life and Canada Pension Plan Investment Board. C.P. Eaton and HSBC acted as placement agents for the fund.
Commenting on current deal flow in the fund’s target segment, Wietlisbach said that as investor sentiment towards private equity was improving, attractive investment opportunities were becoming harder to find than they were a year ago.
However, the fund has a structural feature designed to protect both the manager and its secondary investors in the (not very likely) event that deal flow should dry up altogether. Management fees are payable on drawn capital only, and if the full €500 million proves impossible to invest, LPs will be released from any commitments that remain uncalled.
For the time being, however, there are no signs of the market grinding to a halt. “We constantly have bids out worth €50 to €60 million,” said Wietlisbach. According to a press release, the fund has already completed 15 transactions with leading buyout partnerships, totaling €107 million.