Former Willowridge partner launches fund focused on smaller secondary deals

Michael Bego, a long-time partner at Willowridge Partners, has launched his own firm called Kline Hill Partners that will target the “lowest hanging fruit” in a vastly overlooked section of the secondary market.

Bego, who is managing partner of the recently launched firm, will target investments in secondary stakes valued in the single million-dollar range. He is targeting $120 million for his debut fund, with a cap of $180 million.

Kline Hill so far has one investor on board that committed to the fund and also provided some startup capital for the firm to begin investing, Bego said. It’s not clear who that investor is.

Kline Hill will focus on private equity and venture capital stakes, as well as, opportunistically, buying stakes in real estate, energy and other asset classes. The firm also will look for direct investments, and will offer co-investment opportunities for larger deals.

Bego expects to have three deal professionals. He recently hired former Partners Group secondaries executive Jared Barlow as a partner. Bego and Barlow have “combined 20 years of experience,” Bego said.

He expects to hire one more deal professional as well as someone to run the back office.

The smallest side of the secondary market is a region many firms bypass because “it’s an area where there’s an awful lot of work to put out a small amount of money,” Bego said. “That deters a lot of people. It’s fairly labor intensive.”

Sellers in this part of the market include family offices, endowments, foundations, corporations and banks, Bego said. Public pensions typically aren’t in this part of the market because they have larger holdings, he said.

Barlow noted that while prices have been high in the broader secondary market, there are still deals to be had with smaller transactions. “The smaller end of the market is somewhat insulated from the pay-up pricing of the mid-cap and larger-cap transactions that are going to have more capital chasing them,” Barlow said. “It’s kind of a small-is-beautiful story.”

Action Item: Check out intermediary Setter Capital’s first half volume report here.