Pantheon raises USD 624m for GP-led secondaries programme

While the initial target was not disclosed, Pantheon said that the final close "significantly exceeded" that amount. The programme, comprising a core fund and parallel vehicles, reached a first close in April this year.

The fundraise was quick, managing partner Paul Ward told Unquote: "While not quite a 'friends and family' raise, we did go primarily to people we knew, as we wanted to get the fund up and running quickly to continue capturing opportunities in the market. So we did expect it to be quite rapid, but there is always an element of uncertainty in any fundraise, so we are very pleased that it went so smoothly."

The fund will have a quicker deployment and realisation cycle than most typical vehicles, with a six-year lifespan and a two-year investment period, Ward said. It is managed by Pantheon's existing team rather than a dedicated set of professionals, with Ward pointing out that the managers it works with on GP-leds tend to be more comfortable with people they have an existing relationship with.

The GP-led segment has grown rapidly in recent years, with Raymond James | Cebile's H2 2021 Secondaries Market Update noting that they had surpassed LP-led transactions for the first time in 2020 activity-wise. The market consensus is that 2021 should match that tally; according to Greenhill Cogent's Secondary Market Trends and Outlook report from January this year, the segment could reach USD 50bn globally in 2021.

In June, BC Partners formed a new single-asset acquisition fund with commitments of more than EUR 1bn to buy publishing house Springer Nature, which the GP acquired in 2013 via its 2011-vintage BC European Capital Fund IX (BCEC IX); Neuberger Berman led the secondary deal. Smaller managers are increasingly tapping into appetite for GP-leds, too: in August, Capvis set up a EUR 230m continuation vehicle for the three remaining portfolio companies in Capvis Equity III, with Committed Advisors and Eurazeo co-leading the transaction.

Pantheon noted that single-asset secondaries in particular are a "compelling opportunity, providing investors with the opportunity to invest alongside high-quality fund managers into select assets that have been identified as having the potential for future upside realisation through the extension of holding periods."

Pantheon has a track record of investing in GP-led secondaries, deploying a total of USD 3.6bn across 37 transactions since 2010. These deals were done through the firm's series of Global Secondary Fund vehicles, which had already started focusing on GP-leds in more recent vintages. The current fund in that strategy, Pantheon Global Secondary Fund VI, held a final close in June 2020 on USD 2.2bn; it invests globally, but with a focus on GP-led transactions in Europe and North America. The previous vehicle, Pantheon Global Secondary Fund V, held a final close on USD 3.5bn in May 2016. The latest vintage in that strategy, Pantheon Global Secondary Fund VII, is currently on the road, having been registered in March, according to Unquote Data.

"An increasing proportion of the main fund was going towards GP-leds more recently, but there is a natural limit on that," Ward told Unquote. "Some of our LPs still want to retain exposure to LP-led transactions, while we also saw an opportunity to work with new investors."

Secondaries players are increasingly looking to tap into the growing appetite for GP-leds, but most invest from their generalist secondaries programmes and only a handful of firms have launched dedicated offerings. ICG is one example, with its Strategic Equity funds focusing on the segment; Strategic Equity III closed on USD 2.4bn in early 2020 but the firm is already back on the road and has reportedly collected at least USD 2.5bn for the fourth fund in that strategy.

LGT Capital Partners also held a final close for Crown Secondaries Special Opportunities II (CSSO II) in May, as part of a USD 6bn fundraising effort alongside Crown Global Secondaries V. CSSO II was launched in October 2018, according to Unquote Data, and had raised approximately USD 1.26bn by November 2020. It focuses on GP-led transactions, including spin-offs and single-asset restructurings. 

Investors
Given the aim of offering a dedicated GP-led pocket to existing investors, and the fact that Pantheon was targeting a quick process, returning LPs account for the bulk of PSOF's investor base. It is not a complete overlap though, Ward said: "Around 10% of the investors are new relationships, mostly in the private wealth management channel."

According to Unquote Data, LPs in Pantheon's Global Secondary funds include Ventura County Employees' Retirement Association (VCERA), Strathclyde Pension Fund (SPF), London Borough Of Croydon Pension Fund and Cheshire County Council Pension Fund, among others.

Investments
PSOF has already started investing following the first close, with the fund being around a third deployed. It has committed to 11 transactions since April, with a total value of approximately USD 200m. All of these were completed alongside other Pantheon private equity secondaries vehicles and with GPs the firm "knows well", it said in a statement.

The fact that the fund co-invests alongside Pantheon's flagship secondaries vehicle means that it can be deployed on larger transactions than its size would suggest, Ward said. Nevertheless, the mid-market segment is where Pantheon is seeing the most value, he added: "At the very large end, transactions are very well intermediated and efficient – we tend to prefer investing in more off-market, complex situations so the mid-market is where we see a lot of opportunity."

In terms of geographies, the US and Europe should account for the bulk of deployment, although Pantheon does not rule out other geographies such as Asia, Ward said.

"The pipeline is remarkable," Ward added. "We are closing on a handful of funds at the moment, and we have several more at the analysis stage."

People
Pantheon – Paul Ward (managing partner).

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