LONDON – New York-based Pomona Capital in mid-January closed Pomona Capital IV on $203 million and created a European office in London.
The firm, launched in 1994 with $45 million under management, has since grown its capital tenfold. The group’s primary focus is the purchase of interests in quality private equity funds from limited partners seeking pre-term liquidity, but it also manages a $50 million fund-of-funds, raised in 1997, which takes primary partnership positions. The vehicle has invested in 10 funds to date, a majority of which are managed by groups where Pomona is an existing secondaries investor.
Although Pomona has so far focused principally on interests in United States partnerships, the group also has acquired a handful of positions in non-U.S. funds in view of the greater development and maturity of the American market. Now, however, Pomona is positioning itself to address an increase in the number of European limiteds selling U.S. and European fund interests.
Brian Wright, formerly with Hambros Bank and Schroder Ventures, has returned to the United Kingdom to establish Pomona’s London office after a stint with the firm in New York. The European secondaries market is developing in parallel with the spectacular recent growth and increasing maturity of private equity in the U.K.
“Consequently, Pomona recognizes the need to build an infrastructure to ensure it can carry out the same quality of due diligence here in Europe that it does in the U.S.,” Mr. Wright explained. “I’m here initially to survey the market and identify what is required to cover all bases and to increase European awareness of the Pomona name and products.”
Pomona launched its fourth fund in mid-1998 with an original goal of $175 million (VCJ, November 1998, page 15), but strong appetite, particularly from existing investors, took the vehicle over target. Even at its increased size, Pomona encountered “more interest than it could accommodate,” said Chief Executive Officer Michael Granoff.
Investors in the current fund, 90% of which have participated in previous Pomona vehicles, include the Massachusetts Institute of Technology, BancBoston, Baupost Group, the Rothschild family, Memorial Drive Trust, Syracuse University, Wilmington Trust, Bank Worms, Michael Steinhardt, Gilbert de Botton and Warren Hellman.
Prior Pomona Capital funds have acquired interests in more than 50 funds, among them vehicles managed by Blackstone Group, Clayton, Dubilier & Rice, Warburg, Pincus Ventures, Sevin Rosen, Kleiner Perkins Caulfield & Byers, TA Associates, OakTree Capital Management and Mayfield Partners.
The 20% of Pomona Capital IV invested to date has acquired interests in U.S. funds from groups including Apollo Advisors, Blackstone Group and Bruckman, Rosser, Sherrill & Co., but its ultimate portfolio is also likely to have positions in premier European partnerships.
As well as developing a European business, Pomona is seeking to broaden its geographic reach into the Asian market, with a principal focus on Japan. Last year, Marshall Parke, a former associate of Lexington Partners and the founder of Manistee, a Thai investment bank, joined Pomona as a director to source investment opportunities in the region.
Pomona plans to raise a second fund-of-funds from primary investments during 1999, which will have the capability to invest in both European, and U.S. vehicles.