One of the most highly anticipated secondary sales of recent years was reportedly completed last month with news that a handful of buyers had divvied up a large collection of fund commitments unwanted by the giant California Public Employees' Retirement System (CalPERS).
Like most secondary sales, the transaction was largely hush-hush, excepting an announcement from Euronext-traded fund of funds Conversus Capital that it had acquired roughly $200 million worth of interests from CalPERS as part of a fivefirm consortium also involving Oak Hill Capital Partners. Further details were hard to come by – several secondary market sources close to the deal told PEI that Lexington Partners, HarbourVest Partners and Pantheon Ventures were involved, but were unaware of the scope of the transaction, which was brokered by UBS.
Sources also said the deal involved a specific ‘carve-out’ for two designated buyers – Philadelphia-based Hamilton Lane and London-based Coller Capital. This side transaction was necessary because several of the GPs whose interests were being sold exercised their rights to approve buyers. For a number of reasons, these GPs insisted that Hamilton Lane and Coller would be the only acceptable buyers, which changed the dynamics of the overall auction process, according to sources.
Some general partners – notably Kohlberg Kravis Roberts – have in the past gone so far as to refuse to allow the transfer of interests in funds managed by the firm. Short of this, GPs will sometimes balk at having their portfolio data accessed by all bidders, which could include competing merchant-bank affiliated buyers like Goldman Sachs.
A person involved in the bidding process told sister website PrivateEquityOnline: “Each of the syndicate members bid on the assets … desired, and through a back and forth process, each syndicate member was able to acquire the specific proportion it desired.”
“There was a fair amount of back and forth with the individual GPs in the process,”the same source added.“Anyone who expected this to go off in two rounds over six weeks was unrealistic.”
The assets acquired by Chicago-based Conversus are mostly of special situation funds.
Cash in hand, CalPERS says it is now primed to step up its strategy of committing more money to fewer GPs, and to deploy more capital with smaller managers of emerging markets funds and “cleantech” funds. A 2006 CalPERS memo noted that the giant pension had “concluded that the number of general partner relationships managed by CalPERS staff needed to be reduced to a more manageable number.”
NOVACAP CLOSES TWO FUNDS TOTALING C$565M
Canadian mid-market firm Novacap has closed a C$156 million ($156 million; €107 million) technology fund as well as a C$400 million industrial fund. The two funds represent Quebec's largest private equity initiative to date. Novacap Industries III will acquire majority interests in industrial or consumer product manufacturers and service companies with revenues ranging from C$40 million to C$300 million, while Novacap Technologies III will acquire major interests in information technology and communication companies with revenues of $10 million to $200 million. Novacap's prior buyout funds closed in 2000 on C$210 million, and on C$73 million in 1981. From its 1981 founding to 1999, Novacap backed 31 companies and did more than 50 add-on acquisitions with its first evergreen fund, Novacap Investments.
CHINA TO INVEST $4BN IN FLOWERS FUND
China's sovereign wealth fund the China Investment Corporation (CIC) is reportedly near an agreement to invest around $4 billion (€2.8 billion) in US buyout firm JC Flowers' latest fund, according to media sources. The commitment would be one of the largest ever made by a limited partner. JC Flowers, which has been in the news due to an aborted bid for troubled UK bank Northern Rock and reneging on an agreed $30 billion bid for US loan provider Sallie Mae, closed its last fund on $7 billion in 2006. Past investments by CIC include a $3 billion investment in Blackstone's management company at $31 per share in advance of the latter's listing on the NYSE last year.
WL ROSS RAISES $4BN FOR FUND IV
Distressed investment-focussed WL Ross & Co has raised $4 billion (€2.7 billion) for its fourth fund, surpassing a $2.5 billion target. The fund is significantly larger than its predecessor, which closed on $1 billion in August 2005. It is the first vehicle the firm has raised since it was acquired by asset management firm Invesco, formerly AMVESCAP, in July 2006. Ross has said he wants to take advantage of Invesco's wider investor base to raise significantly larger funds and move his firm into a new market segment. The new fund brings WL Ross's assets under management to around $7.5 billion.
CANAAN CLOSES $650M VENTURE FUND
Canaan Partners has closed its eighth fund on $650 million (€441 million), bringing the venture firm's assets under management to $3 billion. The Silicon Valley-headquartered firm garnered commitments rapidly, with roughly 95 percent of funds raised coming from existing LPs. Fund VIII, like predecessor funds, will target early- stage companies in the healthcare and technology sectors, with a particular emphasis on digital media, communications, enterprise, cleantech, biopharmaceutical, medical device and diagnostics industries. Roughly two-thirds of the fund's capital will go into tech deals. The fund will also increase its international exposure, devoting approximately 25 percent of its capital to deals abroad, up from 10 percent in Fund VII. The firm's predecessor vehicle closed on $450 million in April 2005.
KENSINGTON FOF RAISES $22M AHEAD OF FLOAT
Kensington Capital has met its target in raising $22 million (€15 million) in a private placement for its Kensington Global Private Equity Fund, a closed-end fund of funds to be listed on the Toronto Stock Exchange. The firm raised $22.7 million from retail investors in the fund's April 2007 initial public offering. The vehicle invests alongside Kensington's traditional institutional funds, its Canadian-focused $250 million Kensington Fund IV and its $150 million International Fund I, which targets the US and Europe. The firm expects to commit the raised capital within the next 10 to 12 months. Toronto-based Kensington has more than $350 million in commitments through its funds of funds and direct co-investment programmes.
JORDAN RAISES $3.6BN FOR SECOND FUND
US mid-market firm The Jordan Company has raised $3.6 billion (€2.5 billion) for its second private equity fund, The Resolute Fund II, more than tripling capital under management. The fund was significantly oversubscribed, surpassing its $2.5 billion target. The firm closed its first fund on $1.5 billion in 2002. Like its predecessor, Fund II will invest opportunistically in a variety of industries. It will invest around $200 million per deal, whereas Fund I allocated $100 million to $150 million. Fund I also frequently brought in coinvestors whereas Fund II will be the sole investor in deals.
INVESTCORP TECHNOLOGY PARTNERS RAISES $500M
Investcorp Technology Partners, a growth buyout investor, has closed its latest fund with $500 million in total committed capital ahead of its original target of $400 million. The firm's previous fundraising garnered $300 million for Investcorp Technology Ventures II, ITP's second fund, which closed in 2005. The fund will focus on three types of transactions – buyouts, corporate carve-outs and take-privates or control-oriented PIPEs (private investments in public equity) – in four key areas of the technology market: mobile data applications, enterprise software, communications infrastructure and digital content enablement.
CROSSLINK CLOSES FIFTH HYBRID VC VEHICLE
San Francisco-based Crosslink Capital has closed what it says is the largest-ever “crossover” fund, a tech-focussed vehicle that is both a hedge fund and a venture fund. The firm has held a final close on the fund at its $400 million (€272 million) hard cap. Its first close was in March 2007 on $250 million. The 17-year old firm began employing its crossover strategy in 1995; between its crossover and traditional venture funds, it has more than $1.4 billion in assets under management.
GTCR IN $200M IP VENTURE
GTCR Golder Rauner has again partnered with industry executives to target a specific sector, this time teaming up with media veterans Eric Ellenbogen and John Engelman and pledging to invest roughly $200 million (€138 million). The joint venture, Boomerang Media, will invest in entertainment copyrights and related intellectual property.