Landmark Launches $500 Million Fund IX –

Landmark Partners this month is coming to market with its ninth private equity fund even as one of its partners has noted that there are too many buyers in the secondaries market.

Landmark Private Equity Fund IX, like its predecessor, will have three components. The fund will target primary partnership investments-focusing particularly on first-time funds-direct co-investments and secondary private equity interests. Investors will be allowed to choose the amount of capital they allocate to each focus of the partnership. The firm is setting a $500 million target, said Stanley Alfeld, chairman of the group.

Mr. Alfeld said Landmark expects to raise about half its capital from investors who have no prior relationship with the firm.

The group wrapped the Landmark Private Equity Fund XIII only six months ago and already has invested 85% of that vehicle, which closed on $500 million. Landmark launched the fund last spring (BUYOUTS April 20, 1998, p. 6). Limited partners in Fund VIII chose to have 50% of their commitments allocated to secondary positions, 35% to direct investments, and 15% to co-investments.

Although the firm invested Fund XIII in six months, the group now believes it will take two years to invest the same amount of capital.

“We felt it was proper to limit the size of our fund to reflect what we saw in the market,” Mr. Alfeld said. “My own view is there is more interest in secondaries than is justified and groups have bid up prices to unreasonable levels.”

Mr. Alfeld said Simsbury, Conn.-based Landmark negotiates directly with limited partners to buy their positions and tries not to participate in auctions. One auction that Mr. Alfeld did not refer to is being held by J.P. Morgan & Co. for Raytheon Co.’s $400 million private equity portfolio.

Competition comes from close to home in the U.S.; Lexington Partners, an independent affiliate of Landmark, raised a record $1.1 billion fund for secondary private equity investments last year (BUYOUTS April 20, 1998, p. 8).

Landmark is stepping up its efforts to acquire positions in Europe, but also sees increased competition from European-based secondary investors such as Coller Capital and Pantheon Ventures. To develop an edge in Europe, Landmark in 1997 opened a London office (BUYOUTS June 23, 1997, p. 12).

For the partnership facet of the fund-of-funds, Landmark has selected partners who have spun out and started their own firms. The firm through Fund VIII has committed to buyout firms Friedman, Fleischer & Lowe, L.L.C. and Greyhill Partners, as well as Boston-based Riverside Partners, which has raised a prior vehicle. The group also invested with H&Q Asia Pacific for the experience it will give the firm in Asian private equity, Mr. Alfeld said.