US pensions back fund seeking $1.2bn to buy stakes in VC managers

Collective Global says it plans to invest in 15-20 venture managers in the US and Europe and has already agreed to acquire a stake in a "leading venture firm that invests in market-defining companies across technology and artificial intelligence."

A former senior investment professional who is now a senior adviser at Kuwaiti public pension-backed Wafra is seeking up to $1.2 billion for a debut fund to take stakes in venture capital managers with the aim of tripling investors’ money.

Collective Global was formed by Wafra senior adviser Daniel Adamson, who was previously president of Capital Constellation, and venture firm founder Sheel Tyle. It is also jointly owned by Orange County Employees Retirement System, the City of San Jose Retirement System and other LPs, according to a statement about the firm’s launch.

The vehicle will invest in venture firms through direct equity ownership, debt investments, and revenue shares and will seek to invest in 15-20 managers, according to documents prepared for OCERS’ 15 November board. The fund will primarily target US and European managers in the technology, climate, and healthcare sectors, the documents show.

Collective Global is moving quickly. It has already “reached a definitive agreement to acquire a stake in a leading venture firm that invests in market-defining companies across technology and artificial intelligence,” with plans to reveal the name of the VC firm at a later date.

“While GP stakes have become increasingly common, especially in private equity, private credit and even real estate, in venture we are introducing a new tool for asset managers and asset owners alike,” Adamson, who is the firm’s co-chief executive, told affiliate Private Equity International.

Based in New York, Collective Global bills itself as a “next-generation venture capital firm.” It has three strategies, one of which focuses on GP stakes. The GP stakes business – named Elevate – allows LPs such as pension funds to access venture firms without making substantial direct fund commitments, according to Adamson. LPs can then decide whether to invest in an underlying VC firm’s subsequent funds based on their satisfaction with the manager’s investment approach, he said. GP stakes can be considered less risky than individual fund investments as they participate in the management fee streams of underlying managers.

The OCERS’ board meeting documents show that Collective Global’s debut vehicle, Collective Global Fund I, aims to raise $500 million with a hard-cap of $1.2 billion. Besides investing in the management company of Collective Global, OCERS also committed $100 million to the vehicle, the documents state.

Fund I targets a gross multiple of invested capital of more than 3.2x and a net total value to paid-in ratio of more than 2.5x, the documents show.

The fund can take up to 20 percent stakes in first-time funds or managers whose headquarters are in emerging markets, the documents noted. The main sources of returns are returns from commitments to the underlying manager’s fund, returns from perpetual revenue share in the manager, and the manager ownership terminal value.

OCERS itself will also benefit from carried interest from the fund for having made a first close commitment.

Fund I charges a management fee of 1.5 percent to 2 percent and carried interest of 15 percent to 20 percent, according to the documents.

Overlooked managers

The GP stakes market – a strategy that allows firms to manage shareholder liquidity and generate proceeds to fund growth plans – has grown to more than a dozen main players in recent years. Yet, few firms are focusing on venture capital managers. Research conducted by PEI in April on the 14 main GP stakes firms’ strategies found just one that specified venture capital as an asset class they target by manager.

“We believe that a consortium of premium asset owners is the most strategic partner that a growing venture manager could hope to find,” Adamson said. “By bringing an asset owner consortium together, we’re poised to partner with top venture managers who recognize that value.”

OCERS is enthusiastic about the opportunity. “We teamed with Sheel and Daniel to help build Collective Global because we believe there is an opportunity to partner with the next generation of leading venture firms,” CIO Molly Murphy said in a statement.

Prabhu Palani, CIO of the City of San Jose Retirement System, added, “We’re always looking for innovative ways to capture the phenomenal success of the venture asset class for the benefit of our pensioners,” he said. (The system oversees San Jose’s Federated City Employees’ Retirement System and Police and Fire Department Retirement Plan.)

While rare, there have been some notable stake sales by established venture firms in recent years, as Venture Capital Journal has previously reported. Last year, Sofinnova Partners, an early stage life sciences firm based in Paris, sold a minority stake to Apollo, per a VCJ report in May 2022.

Other venture firms that have sold parts of themselves include New Enterprise Associates and General Catalyst. NEA sold a 15 percent stake to Neuberger Berman’s Dyal Capital Partners and Wafra Inc in November 2020, according to a Bloomberg report. Meanwhile, General Catalyst sold a “high single-digit” stake to Petershill (a unit of Goldman Sachs) for $200 million in December 2018, the Wall Street Journal reported at the time.

Apart from the venture GP stakes platform, Collective Capital also has an early-stage venture strategy and an opportunistic venture mandate. The three channels have collectively raised more than $1 billion in assets, according to Adamson. He declined to comment on fundraising or provide capital-raising details for each channel.

Prior to co-founding Collective Global, Adamson was president of Capital Constellation, a joint venture specializing in GP stake investments in alternative asset management firms that is backed by Wafra, Alaska Permanent Fund, the New York State Common Retirement Fund and other institutional LPs.

Adamson remains a senior adviser and chairman of the Constellation Strategic Committee. Tyle serves as co-chief executive alongside Adamson.

Additional reporting by Lawrence Aragon

Note: This article was updated to reflect that Railpen is not a part-owner of Collective Global and that Daniel Adamson is a senior adviser at Wafra, a Kuwaiti public pension fund.