Unigestion launches Secondary V

Paul Newsome, partner and head of investment solutions at Unigestion, told Unquote that the latest fund will target €700m and expects to hold a first close during Q2 2020, depending on when the GP's two previous vehicles reach full deployment. The vehicle expects to hold a final close in Q2 2021.

The vehicle's predecessor, Unigestion Secondary Opportunity IV, held a final close in December 2017 on €306m. The GP invested simultaneously from Euro Choice IV, which held a final close on €437.5m in July 2008. The funds are 90% and 75% committed respectively.

Unigestion Secondary Opportunity IV has a net return target of 1.6x cost and 20% IRR. Newsome said the vehicle is currently above its IRR target, reporting 27%. The new fund will target a net LP return of 20%.

The fund is based in Luxembourg. Arendt & Medernach advised on fund formation, but the GP did not engage a placement agent for the fundraise.

Investors
Newsome told Unquote that the GP expects at least a 60% re-up rate. Asked about the current LP base, Newsome said: "We have several existing investors who have already said they will come in for the first close – but our typical investors are pension funds, insurance companies and financial institutions."

On the geographical spread of the fund's LPs, Newsome said: "Typically, in our funds we have around 50-70% from Europe and around 30-50% from the rest of the world outside Europe, including the US and Australasia. We already have a broadly spread investor base. We could opportunistically target certain new geographies, but we will mainly stick with the existing ones."

The vehicle will give investors a choice of whether they want their commitments to be invested in Europe, globally or outside Europe, combining the separate geographical strategies of its predecessor funds, Newsome told Unquote.

The GP commitment is expected to be 1-2%, said Newsome. The vehicle has a €5m minimum commitment but can make discretionary exceptions.

Investments
The vehicle will target secondary investments in small, non-competitive secondary deals below €50m, deploying tickets of €10-50m per investment. The vehicle aims to make 30-40 investments.

Asked about the focus of the fund, Newsome explained: "We are looking to pursue small tailored liquidity solutions such as fund restructurings, secondary directs, structured secondaries, single LP stakes, and small portfolios of LP stakes. We are looking for opportunities mainly in buyout funds and growth funds, but we will opportunistically consider other strategies such as venture capital. The small-cap and mid-market is our key focus and our strength."

Newsome added that the GP has a strategy for sourcing non-auctioned secondaries opportunities: "We source non-competitive deals through the network we have built in the small and mid-market; we know more than 500 GPs. Most secondaries transactions are led by the GP, so it's vital to have that network within the GP community.

"Either we are an existing investor or they want us to be a long-term investor, so they want to work with us. The fact that we also invest in primary funds gives us a real advantage over specialist secondary investors."

The vehicle is not looking for transactions at the large-cap end of the market, according to Newsome: "We are not looking to do these hugely diversified transactions of big portfolios with hundreds of companies in them; we are looking at concentrated portfolios of high-quality assets. Often the fund restructurings and secondary directs we do can be tailored, you can select which portfolio companies you want to have in the portfolio."

"We can work with a GP to create a restructuring that benefits all parties," said Newsome, explaining that the firm is able to approach GPs directly.

The vehicle already has a number of deals in the pipeline, but some may initially go towards the full deployment of its two predecessors.

People
Unigestion – Paul Newsome (partner, head of investment solutions).

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