Arcano holds EUR 450m final close for latest secondaries fund

The fund was in the market for around one year and a half and held a first close in early 2021, Ricardo Miró-Quesada, partner and head of private equity for Arcano Asset Management, told Unquote.

Its predecessor vehicle in the strategy (known as ASF X) held a final close in 2017 on EUR 300m. ASF XIV is the firm’s fourth dedicated secondaries fund.

The larger size of the new fund will allow for greater diversification in the portfolio and slightly more capacity for deals, in particular for GP-led syndicates and for larger portfolios of LP stakes, Miró-Quesada said.

The current market environment is likely to generate opportunities for Arcano’s secondaries strategies, Miró-Quesada noted. “Some direct GPs are taking longer to raise capital so going to the secondary market as a source of liquidity for their other funds, and also to staple deals so they can raise more primary capital,” he said.

In these situations, Arcano can bring its full range of strategies into play, he added. “This is where we can evidence the Arcano platform: we have not just the secondary capacity, but also primary and co-investment. GPs like to work with us as we’re not just an investor who will do the secondary but can be in it for the long-run.”

The final close of ASF XIV comes shortly after Arcano announced the final close of its debut impact fund-of-funds in December 2022 on EUR 280m, as reported.

Investors
The fund is backed by a range of investors from Spain, Italy, Northern Europe and Latin America, according to a press release.

The percentage of international investors in ASF XIV is higher than that of its predecessor, Miró-Quesada said. “We have been able to show a consolidated track record, so we have our local LP base that has been with us for many years, but a lot of new international LPs have also come on board,” he said.

He added that the growth in fund size has also allowed more institutional LPs to commit, with those with larger ticket requirements now being able to join the investor base.

Investments
ASF XIV will target mid-market buyout opportunities, deploying tickets of EUR 5m-EUR 50m. The fund has made 30 deals so far, making it close to 50% deployed, Miró-Quesada said.

It will invest 80%-90% of its capital for secondaries, with an even split between Europe and the US, and between LP stakes and GP-leds, Miró-Quesada said. The remainder is reserved for direct co-investments, he added.

The GP sees strong potential in the LP stakes portion of its strategy, Miró-Quesada said. “The secondaries market has been growing a lot, but in the current environment where distributions will slow down and some LPs may need liquidity, some may have exceeded their limits due to the denominator effect – this is already resulting in LP stakes being sold at attractive discounts.”

At the same time, with GPs experiencing a tough fundraising environment and needing to hold their assets for longer, this part of the market is also likely to generate opportunities. These deals allow Arcano to provide capital for one or several assets in a continuation fund, with the aim of supporting further growth, Miró-Quesada said.

People
Arcano Asset Management – Ricardo Miró-Quesada (partner and head of private equity).

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