HarbourVest raises more than $3b for secondaries fund
HarbourVest Partners has exceeded the $3 billion target for its latest global secondary fund after about one year in the market. According to regulatory filings, Dover Street VIII has accumulated LP commitments of about $3.1 billion, slightly larger than its predecessor raised in 2007.
The vehicle has a commitment period of 10 years, with the option of four one-year extensions, and a commitment period of 3-4 years. The annual management fee is 81 basis points, based on 50% of committed capital until half the corpus has been invested. After that, fees are charged based on total capital committed. Carried interest is 12.5%.
HarbourVest targets a combination of LP interests in funds, newly-formed partnerships that purchase GP portfolios directly and customized solutions that provide liquidity to sellers. The firm generated $94 billion in secondaries deal flow between 2008 and 2011, with $2.4 billion in closed transactions. As of March, 2012, Dover Street VII had generated a net IRR of 20.1%, versus a 10.1% gain in the S&P 500 over the same period, and a multiple of 1.4x.
The secondaries market globally has evolved considerably in recent years. Secondary direct and structured investments account for more than 60% of Dover Street VII, whereas pre-2000 trading in traditional LP interests dominated.
In terms of transaction sourcing, endowments and foundations, public pension funds and financial institutions continue to account for at least 60% of global deal flow.
While Asia's secondaries market is nascent, GPs in several markets are struggling to raise new funds. This creates an opportunities for the likes of HarbourVest, who buy assets or entire portfolios directly, or provide top up capital to managers.
"You have guys who are good managers but they are struggling with fundraising and plan on getting back into it once things look less ugly," Tim Flower, a principal at HarbourVest, told AVCJ earlier this year. "We come in and replace LPs that don't have the stomachs to continue, buy the portfolio, spin out the GP and give them some money for the portfolio as well as for new deals."
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