Portfolio Advisors hits first close for secondaries fund

Portfolio Advisors Secondary Fund IV, which has a $1.5bn target, is set to invest in mid-market buyout, venture capital and special situations funds. Its hard-cap amounts to $2.25bn.

The vehicle's predecessor, Portfolio Advisors Secondary Fund III, held a final close on $1.5bn in late 2017.

Fund IV targets a final close between June and December 2020, according to the source, who also stated that the fund is set to hold up to four closes, with one taking place every quarter.

The second close is expected at the end of March, and the third at the end of June. However, if there is more appetite from the investors, Portfolio Advisors is open to holding a fourth and final close in December 2020.

The GP is planning to make its first investments in 2020, and the fund is expected to be fully invested within three to four years, the source said.

The fund has a 10% preferred return, with the carried interest amounting to 10% net, according to documents seen by Unquote.

Investors
Among the LPs that have backed Fund IV are Pennsylvania Public School Employees' Retirement System and University of West Florida Foundation (UWF Foundation), which have committed $150m and $4m, respectively.

The source added that 100% of the commitments at first close came from LPs in the previous fund. Portfolio Advisors typically gets 80-90% of commitments from existing investors, they said.

Other LPs that backed Fund III include Missouri Local Government Employees Retirement System and Eversource Pension Plan.

Investments
Portfolio Advisors is looking to allocate 25% of Fund IV to venture- and growth-focused strategies; 10% to distressed or special situations funds, including mezzanine, energy or other alternative funds; and another 10% to opportunistic strategies. Portfolio Advisors Secondary Fund IV will also have exposure to co-investments.

The documents seen by Unquote also mention that around 80% of Fund IV is set to be invested in the US, while the source added that the fund will invest opportunistically in Europe and Asia.

Overall, Portfolio Advisors Secondary Fund IV is expected to have a similar strategy to its predecessors. A quarter of Fund III's strategy exposure was in mid-market buyouts as of September 2018, while venture and growth amounted to 27%.

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