Secondary Notes –

Landmark Partners Hopes To Set New Mark

Landmark Partners has closed on more than $250 million for Landmark Equity Partners XI, a secondary fund with a target of $750 million, according to documents filed with the Securities and Exchange Commission. The firm has raised roughly a third of its newest fund in just over a year.

The firm began raising the fund in April of last year. Its first SEC filing for the fund reports that Landmark had raised $109 million by October 2002. By May, the fund had grown to $221 million.

Founded in 1984, Landmark is based in Simsbury Conn. and has an office in London. It declined to comment on its fund-raising.

Landmark Equity Partners X set out to raise $400 million, but it came in with a final capitalization of $583 million. Landmark launched that fund in July 1999 and held a first closing on $350 million in June 2000. The fund was well received by return investors as well as some new investors. Fund X began making investments immediately after its June 2000 first close.

Limited partners in past Landmark funds include Allstate Insurance Co., BancBoston Investments, California Public Employees’ Retirement System (CalPERS), Cornell University, Franklin Life Insurance Co., Howard Hughes Medical Institute, IBM, Johnson & Johnson, Los Angeles County Employees’ Retirement Association, Pacific Mutual Life Insurance, Pensylvania Public School Employees’ Retirement System (PSERS), Pensylvania State Employees’ Retirement System (SERS), Riverside Church of New York City, Rockefeller University, SunAmerica and Travelers Insurance Group.

AXA Private Equity Competes with Defectors

AXA Private Equity has no time to celebrate. The Paris-based private equity firm scheduled a first close on $134 million of its $280 million secondary fund, AXA Private Equity Fund of Funds II. At the same time, it finds itself competing with former AXA investment professionals with the private equity firm Keyhaven Capital, a fund-of-funds firm that is also raising a fund for deals on the secondary market.

AXA Private Equity Fund of Funds II will invest in early-stage secondary deals in the early European and North American private equity markets and buy stakes in funds that are between 20% and 50% invested. The fund will also make primary investments. It expects to hold a final close by the end of the year.

Keyhaven Capital was founded by former AXA London fund-of-fund leader Sasha van de Water, who left AXA last year after changes in the firm’s structure. Keyhaven is reportedly raising a $169 million fund and expected to close on $56 million by the end of August.

Auda Closes on $133M

New York-based Auda Advisor Associates has closed on approximately $133 million for its Auda Secondary Fund. The capital so far amounts to one-third of the firm’s goal of $400 million. The fund had a first close earlier this year and has had a rolling close.

Managing Director Richard Lichter says the fund will likely hold a final close by the end of the year. “Fund-raising’s never easy but it’s moving along,” he says. “With the exception of Coller’s fund, it’s even been difficult for a lot of the secondary players. If you look at what was on their [PPM] covers originally and what they’ve finished with you’ll see the market is still tough. “

Auda focuses on smaller deals that do not compete with large firms in an auction-like environment for deals. The firm will invest between $5 million and $75 million per deal, but invests an average of $15 million per deal.

Before the first close of this fund, Auda had been doing all of its secondary deals from its fund-of-funds. Now all secondary deals will be done from the Auda Secondary Fund. The fund’s emphasis will be on secondary buyout investments, but it will also look at venture capital, growth equity and mezzanine deals. “We think buyouts is a better part of the market,” says Lichter, who joined Auda in early 2002 and was previously a managing director with Lexington Partners.

Auda differs from other U.S.-based secondary funds in that most of its limited partners are European. Its LPs include pension funds, endowments, foundations and family groups. Auda also has more investment from Germany and Scandinavia than other firms with heavy European investment, Lichter says.

Credit Suisse Buys DB Portfolio

Deutsche Bank has sold a private equity portfolio of buyout funds worth between $400 million and $500 million to Credit Suisse First Boston (CSFB). The transaction is the biggest to date for CSFB Strategic Partners and more than doubles the number of buyout funds under its management. The deal involves more than 30 U.S.-based funds and adds to CSFB’s 20 LBO funds.

The purchase was made by CSFB Strategic Partners II, a CSFB Private Equity fund that is still being raised and reportedly has raised $1.3 billion. The fund focuses on secondary deals in the LBO market, usually involving third-party investors.

Neither Deutsche Bank nor CSFB would comment on the transaction. CSFB also declined to comment on its secondary fund-raising.

The move leaves Deutsche Bank with a portfolio valued at approximately $3.4 billion. It is the latest effort by the German bank to shed its extensive private equity holdings. Earlier this year, MidOcean Partners acquired the late-stage private equity portfolio of Deutsche Bank’s DB Capital Partners (DBCP) for $1.6 billion. Deutsche retained a 20% stake in the portfolio. Ted Virtue, chief executive officer and managing partner at DBCP, led the management buyout team. Deutsche Bank finished reorganizing the last entity to come out of DB Capital Partners (DBCP) this past April, with Deutsche Bank Private Equity Fund of Funds Group being made part of Deutsche Asset Management (DeAM).

Deutsche Bank wrote down the value of its private equity holdings by about $230 million in the first quarter. It expects its second-quarter results to be better.

CSFB Strategic Partners is a wholly owned unit of Credit Suisse First Boston Private Equity, which has more than $26 billion in funds under management and is the largest manager of private equity funds worldwide.

Polar Investments Sells Stake in Giza Venture

Polar Investments has sold its share in Giza Venture Capital, an Israeli venture capital investor, according to published reports. Polar Investments had committed a total of $3 million to two Giza funds. The sale was reportedly made to a secondary fund.

Giza Venture Capital’s other limited partners include Bank Hapoalim, Bank Leumi, Bessemer Trust, Credit Suisse Asset Management, DBS Bank, Deutsche Banc Alex Brown, GE Equity, GIC, NIB Capital, Temasek, and various pension funds.

Separately, Tel Aviv-based Polar Investments announced that it sold its 42.4% stake in Hazera Genetics to French company Vilmorin Clause & Co. The deal was announced in December it didn’t formally close until early July.

Coller Adds Investment Director in Europe

As part of its expansion after raising the largest secondary fund in history, Coller Capital hired Susan Flynn as its director of European investments. Flynn was most recently the chief executive officer of the United Kingdom’s General Motors Investment Management Corp. (GMIMCO). Flynn established the U.S. automaker’s international private equity program. Prior to that she was an associate director of Rothschild Asset Management, where she focused on biotech and health care deals.

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Coller Capital is in the midst of a growth spurt. The London-based firm (see profile, page TK) opened a New York office in April. It’s the firm’s first permanent presence in the United States and its first office outside of the United Kingdom. The office is led by Frank Morgan, president of Coller Capital’s U.S. operations and an attorney who worked with Coller Capital as a partner with law firm Dewey Ballantine.

CalSTRS Ups its Secondary Ante

The California State Teachers Retirement System (CalSTRS) plans to increase its stake in secondary funds and funds-of-funds as part of its strategy to increase its commitment to private equity. Overall secondary investments are targeted to comprise 2% of its alternative investment portfolio. That includes venture capital and buyout secondary deals.

“We’ve always been very interested in secondaries,” says Sherry Reser, spokesperson for the Sacramento, Calif.-based pension fund. She adds that CalSTRS changed its regulations a few years ago to enable the pension fund to move more quickly on secondary deals. “We need to act pretty quickly on them. We still do very careful due diligence, of course.”

With 4.7%, of its total assets now committed to private equity funds, CalSTRS’ alternative investment portfolio is just short of its 6% target allocation.

The pension fund’s secondary plans are part of a larger goal to nearly double the size of its private equity portfolio over the next four years. CalSTRS expects to invest up to $8.7 billion in buyout and venture capital funds by 2007, according to a new business plan adopted by the retirement system earlier this month.

Currently $4.7 billion of the plan’s $102 billion investment portfolio sits in private equity funds. Western European and U.S.-based private equity funds are slated to receive the bulk of CalSTRS’ new commitments.

The pension fund will seek two new investment officers to manage the growth of the portfolio.

Additional reporting on CalSTRS item by Carolina Braunschweig.