Whitehorse looks to raise biggest preferred equity fund – exclusive

The preferred equity specialist is returning to market two months after announcing the final close on its second fund.

Whitehorse Liquidity Partners is back in market with its third preferred equity fund, two months after raising $1 billion for its sophomore vehicle.

The Toronto-headquartered firm, which was founded by former Canada Pension Plan Investment Board secondaries head Yann Robard, is targeting $1.5 billion for the vehicle, according to two sources familiar with the matter. It is unclear whether the fund’s hard-cap has been set.

If it hits its target, the fund will be the largest-ever preferred equity fund. It is almost twice the target size of its predecessor, Whitehorse Liquidity Partners II. That fund hit its $1 billion hard-cap against an $800 million target, as sister publication Secondaries Investor reported in September.

London-headquartered 17Capital‘s 2016-vintage 17Capital Fund 4 holds the title for the largest vehicle at €1.2 billion, according to PEI data.

Preferred equity financing for portfolios addresses a gap in the market between debt providers and traditional secondaries buyers. Portfolio holders can take on preferred equity – a tranche that sits between debt and equity in the capital structure – instead of selling stakes in their portfolios, keeping exposure to any potential upside while benefiting from liquidity.

Whitehorse has 23 staff, according to its website. The firm hit the $400 million hard-cap on its debut vehicle in May last year, according to PEI data.

Alaska Permanent Fund has backed both of Whitehorse’s vehicles with commitments totalling $150 million, according to PEI data.

Whitehorse targets preferred equity investments in private equity portfolios on the secondaries market, making transactions with institutional investors looking to exit their fund stakes, funds of funds wanting to create distributions for their limited partners and secondaries buyers interested in financing portfolio purchases.

There was at least $2.4 billion in preferred equity deals in the first half of this year alone,  compared with $3 billion for the whole of last year, according to data from advisor Evercore.

Whitehorse declined to comment.