Stanley Alfeld, chairman and managing general partner of Landmark Partners, plans to enjoy his retirement soon, but the firm he founded in 1984 is far from slowing down.
Landmark hopes to be the latest secondary buyer to close a large fund. The firm expects to close its new fund later this month. Landmark Equity Partners XI now stands at $470 million and it may reach $600 million in the next few weeks, says Partner Anthony Roscigno.
The spike in the fund’s size comes after a slow start. The Simsbury, Conn.-based firm began raising the fund in April 2002. It raised $109 million by October 2002, according to federal filings. But, in the slow fund-raising environment of 2003, Landmark raised only about $260 million by December.
Roscigno says that about 70% of the fund’s limited partners are returning LPs. He adds that the firm did not shy away from any public LPs and added some new names. Roscigno declined to name the firm’s new LPs. Limited partners in past Landmark funds include Allstate Insurance Co., BancBoston Investments, the California Public Employees’ Retirement System, Cornell University, Franklin Life Insurance Co., Howard Hughes Medical Institute, IBM, Johnson & Johnson, the Los Angeles County Employees’ Retirement Association, Pacific Mutual Life Insurance, Pennsylvania Public School Employees’ Retirement System, Pennsylvania State Employees’ Retirement System, Rockefeller University and SunAmerica.
So far the firm has closed on two deals from the fund. Also, Landmark took part with Goldman Sachs and Vision Capital in a $189 million fund to manage the investment portfolio of CS Structured Credit Fund. That deal, announced last month, is a secondary buyout for a direct portfolio of companies. It marks the first time Landmark has participated in such a deal with Vision.
While most of the capital being put to work on these deals is going to buyout interests, Roscigno says that Landmark has “no sector allocations. We’re very opportunistic.”
The firm’s last dedicated secondary fund, Landmark Equity Partners X, was oversubscribed. It had a target of $400 million and raised $583 million. Landmark launched that fund in July 1999 and began making investments immediately after its first close in June 2000.
Pantheon Shoots for $600M
Pantheon Ventures’ decision to sell out to a larger private equity firm has not slowed down the giant firm. It is well on its way to raising its 12th fund, which will focus on secondary investments.
Pantheon, which manages about $7 billion in fund-of-funds assets, has held a first close on $143 million for Pantheon Global Secondary Fund II, which has a target of $600 million and a hard cap of $900 million, according to a document filed with the Securities and Exchange Commission. A spokesperson for the San Francisco-based firm declined to comment on the fund-raising, except to say that it is going well.
Pantheon raised its first dedicated secondary fund in 2000, pulling in $418 million.
Limited partners in the new secondary fund include Bullshead D, the Federal Express Corp. Employees Pension Plan Trust and the University Retirement System of Illinois.
Bullshead, which is represented by JPMorgan Chase Bank, put $75 million into the new secondary fund, while the FedEx pension fund invested $35.2 million and the Illinois retirement system chipped in $25 million, the SEC document shows.
The investment by the Illinois retirement system is significant because it marks the first time that it has invested in a dedicated secondary fund since 1990, says John Krimmel, the retirement system’s chief investment officer. The retirement system, which has about $11 billion under management, has closed on investments in two dedicated secondary funds since the beginning of the year.
Krimmel says the Illinois retirement system avoided investing in secondary funds over the past decade because valuations were too high. “The recent market conditions over the last three years make it a good opportunity,” he says. “[Pantheon Ventures] has good secondary deal flow, and that’s obviously attractive as well.”
Pantheon, founded in 1982, agreed in December to be acquired by London-based Russell Investment Group for an undisclosed amount. Pantheon retained its name, its focus on private equity and all of its 60-plus staffers. It now acts as Russell’s private equity services branch.
Last year Pantheon announced the final closing of its new fund-of-funds, Pantheon USA Fund V (PUSA V), with $313 million, eclipsing its initial target of $200 million. The fund will co-invest in U.S.-based private equity funds over the next three years. PUSA V will mostly likely reach a 20% allocation for secondaries, which is a significant departure from past PUSA funds.
Pantheon, which has offices in the United States, Europe and Asia, says that it manages investments in about 500 private equity partnerships in 30 countries.
The firm does not disclose the names of the funds it invests in, but market researcher Thomson Venture Economics (publisher of VCJ), shows that Pantheon is an investor in funds run by Advanced Technology Ventures, Battery Ventures, InterWest Partners, Menlo Ventures, Morgenthaler Ventures, Oak Investment Partners and Worldview Technology Partners.
ING Picks Pomona To Manage $1.1B
With five secondary funds and three primary investment funds-of-funds to worry about, you might not expect Pomona Capital, which has just 17 employees, to put another billion dollars on its plate. But the New York-based firm inked a deal to manage approximately $1.1 billion in private equity assets for the U.S. portfolio of Dutch insurance giant ING.
Pomona will invest $500 million over the next five years in primary and secondary fund investments. It will also manage ING’s U.S. private equity portfolio, which has invested $600 million in 57 funds.
“[ING] wanted to have all of these things centralized and organized,” says Michael Granoff, Pomona’s chief executive officer. “They are increasing their commitments in private equity and we’re organizing it.” He says that the agreement gives Pomona a larger footprint in the private equity world. “We’ll have relationships with a lot more general partners, and those relationships will be deeper and stronger than before. It really gives us a critical mass that we didn’t have before.”
Granoff adds that he expects the new relationships to give Pomona better visibility into the industry. “In the funds-of-funds business it’s harder and harder to tell what the best funds are going to be and then get into them,” he says. “In the secondary business it’s harder to find good transactions. This is quite a significant step for us.”
Pomona has been a primary investor in many private equity funds, including Apollo, Blackstone, Kleiner Perkins Caufield & Byers, Menlo Ventures, New Enterprise Associates, Sevin Rosen Funds and Warburg Pincus.
As a result of the deal, Pomona will add fewer than five new staff members. Granoff says he is being careful not to become an asset collector. “It helps to have critical mass but not lose your soul in the process,” he says.
Comdisco Assets Find Home
Windspeed Ventures will manage and liquidate the investment portfolio of Comdisco Ventures. Waltham, Mass.-based Comdisco emerged from bankruptcy protection in August 2002 with a mandate to sell all its remaining assets.
The question, then, was not whether the company would sell its investment portfolio – which includes many Internet and optical networking startups – but when it would sell and for how much.
Comdisco invested $800 million over the years to create a portfolio of 250 companies, including those in communications, computer hardware and software, the Internet, semiconductors and biotech.
Comdisco saw 27 of its investments launch IPOs, but 50 of its portfolio companies had gone under by the time it filed for Chapter 11 bankruptcy protection, according to Thomson VE. That portfolio’s fair market value is now about $15 million, according to documents filed with the SEC.
Windspeed, based in Lexington, Mass., will manage the portfolio for a fee of $1.53 million. The firm’s $10 million Acquisition Fund will provide 80% of the capital for any follow-on investments in Comdisco’s portfolio. Comdisco will pony up an additional $1.5 million, and the two will co-invest in all follow-on rounds.
Windspeed and Comdisco will share distributions in accordance with their respective interests. “It’s a win for both sides,” says Daniel Balthon, a general partner and chairman of Windspeed.
Lexington Adds New GP
Duncan Chapman became Lexington Partners sixth general partner last month. He previously served as president of his own firm, Butler Chapman & Co., which he co-founded in 1991. Chapman also served as a senior vice president with Lehman Brothers, where he oversaw mergers and buyouts in traditional and industrial sectors such as manufacturing, retail and textiles.
Lexington, which manages about $6.8 billion, has offices in Boston, London and Menlo Park, Calif.
Carolina Braunschweig contributed to this report.