Secondaries firm Beneficient readies sale of Paul Capital funds

A growing secondary-market specialist is working with Paul Capital, a secondaries and fund-of-funds firm that has been winding down, to liquidate the firm’s eighth and ninth secondary funds.

Beneficient Co, a liquidity provider in the secondary market, will hire seven people from Paul Capital as part of the transaction, said Brad Heppner, chief executive of Beneficient.

Beneficient plans to hire an investment bank to auction off assets from the two Paul Capital funds. Beneficient will serve as a custodian of the assets.

At closing and final liquidation, expected at year end, LPs in the two funds are expected to receive 100 percent of net asset value for their holdings, as well as reductions to past and future management fees, Beneficient said in a statement. Beneficient will provide additional value protection over time and underwrite the NAV of LP interests.

Heppner said the deal with Paul Capital took about two years to put together because the firm holds hundreds of interests in the two funds.

“This isn’t your typically vanilla intermediated auction portfolio,” he said. “It’s complex.”

Phil Jensen, partner at Paul Capital, said the firm spent an “extraordinary amount of time” exploring various options and listening to its limited partners.

Closing out

In 2014 Paul Capital decided to stop raising its 10th fund, after generating little LP support, and wind down its business. At the time, Paul Capital still had several active funds: Funds VII, VIII, IX and Fund X (which raised $145 million before the firm stopping fundraising).

Paul Capital hired intermediary Greenhill Cogent to sell Fund VII on the secondary market, which still had about $80 million of remaining value, Buyouts reported. It’s unclear whether that fund was sold.

LPs in the $1.65 billion Fund IX were agitating for fee reductions since the firm was winding down, sources told Buyouts at the time.

Along with Jensen, Paul Capital staffers moving over to Beneficient include Daniel Mulderry, Guy Rico, Randall Schwed, Elaine Small, David de Weese and Debbie Wong.

Beneficient CEO Heppner said the Paul Capital deal illustrates his company’s efforts to tap into demand from institutions looking to sell alternative assets. Many of these sales are intentionally kept out of broader auctions.

“They want it to be confidential,” Heppner said. “We also deal in very complex transactions with assets that may be long in the tooth or highly structured. These are ones that auctioneers have no interest in. It’s a perfect fit for us.”

Acquisition of asset custodian

Separately, Beneficient said it’s expanding its business into the high-net-worth universe by acquiring Provident Trust Group. Terms weren’t disclosed. Provident is an administrator and custodian of $3 billion in self-directed retirement accounts for wealthy individuals, with holdings in PE funds.

Heppner said the company has about 20,000 clients, many of whom invest in GPs through their retirement accounts and other means. He sees plenty of runway to add more clients.

“Our platform, with the liquidity products that we provide and our capability to service these assets, was a perfect fit,” he said.

Beneficient, which is backed by a large trust and the Heppner family office, is the latest in a series of financial companies Heppner launched. He declined to provide the name of the trust.

Heppner also launched Crossroads Group, a fund-of-funds investor sold to Lehman Brothers in 2003, and now part of Neuberger Berman. Capital Analytics, an administrative provider Heppner founded, is owned by Mitsubishi UFJ Financial Group.

Action Item: See 2014 article about Paul Capital: https://pehub.com/buyouts/paul-capital-partner-sullivan-to-depart-as-firm-sells-off-fund-vii/

Photo courtesy of iStock/Blulz60