Filings with the SEC show Goldman Sachs Group, Inc. (NYSE:GS) has built up a new fund of almost $1.2 billion that would invest in private equity interests purchased through secondary markets.
A previous fund floated in 2009 had raised roughly $5.5 billion and Goldman is seeking to raise between $4 billion to $5 billion for the present fund (the fifth in the series), according to information provided to investors. In an ongoing trend, last year Lexington partners raised a huge $7 billion in its seventh secondary raising.
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Styled the “GS Vintage Fund VI LP,” this global fund will invest in fund portfolios and also structured secondary transactions. Co-headed by Harold Hope and Michael Brandmeyer, who report to Christopher Kojima, Partner, the fund will have to compete in this rapidly developing space that is seeing fresh competition every day, such as Coller Capital, Neuberger Berman and Partners Group.
But these funds have plenty of opportunities, as across the world, banks, financial institutions and pension funds dispose of assets to meet new and stringent capital reserve requirements and to avoid risks. With the IPO market in trouble after the Facebook fiasco, many private equity firms may not have recourse to this route to offload their investments, and secondary structured funds such as the new one from Goldman Sachs could step in to take advantage of the opportunities.
According to research firm Preqin, some recent funds in this sector and their objectives are as follows:
- Clairvue Capital Partners ($500 million) – focus on recapitalizing real estate private equity funds, real estate operating companies, institutionally managed property portfolios, joint ventures, investors’ balance sheets and other types of real estate platforms.
- Japanese fund of funds manager Alternative Investment Capital ($152mn) – private equity funds across the Asian region, including China, India, Southeast Asia and Australia.
- Morgan Stanley (NYSE:MS) Alternative Investment Partners ($720mn and an additional $580mn for its affiliated separate accounts) – secondary investments in niche buyout, venture, mezzanine and distressed private equity (including special situations, distressed debt and turnaround) funds.
Other success stories include AXA Private Equity ($7.1 billion) and CS Strategic Partners, the secondary arm of Credit Suisse Group AG (NYSE:CS) (CSGN.VX) ($2.9 billion).
With trading volumes of private equity interests hitting almost $25 billion in 2011, the field is wide open and analysts expect that level to breach in 2012.