Landmark’s next PE secondaries fund has 14-year term

  • Long fund life, distribution waterfall flagged in LP doc
  • Third-party owner to put up majority of GP commitment
  • Fund targeting $4 bln, with $2.4 bln raised

Secondaries firm Landmark Partners’ next private equity vehicle will have a 14-year fund life, with a possible two-year extension at the GP’s sole discretion, pension documents say.

This and other unique terms are listed in an investment evaluation prepared by StepStone for State of Connecticut Retirement Plans and Trust Funds. The pension system announced a $100 million commitment to the fund in September 2017.

Landmark Equity Partners XVI is targeting $4 billion, with a hard cap of $4.75 billion, according to the report. An SEC filing shows more than $2.4 billion raised as of December. The firm declined comment.

In addition to the unusually long fund life, StepStone flagged the distribution waterfall, which is based on an 8 percent cumulative, non-compounded annual return. According to the report, the hurdle for a closed-end fund is typically based on a compounded annual rate of return, “which is more LP favorable.”

Once that hurdle is cleared, the GP’s carried interest is 10 percent. The management fee is 1 percent of LP commitments for eight years following the initial close, and steps down thereafter.

Also interesting, Landmark’s third party majority owner, Old Mutual Asset Management, will put up the majority (60 percent) of Landmark’s GP commitment to the fund, slated for 1 percent. The remaining 40 percent will come from Landmark professionals.

Old Mutual Asset Management, which invested in June 2016, will receive carried interest and management fee revenue for Fund XVI. StepStone reported that although “OMAN has the ability to control certain decisions,” the company “expects to be a passive owner, with [Landmark’s] professionals continuing to control day-to-day management and all investment decisions.”

The fund will follow the same strategy as its predecessors, especially Fund XV, which had a net IRR of 15.3 percent as of Dec. 31, 2016. Deal types will include portfolio sales, traditional fund and GP interest purchases, fund restructurings and preferred structures. A 10 percent primary-fund allocation will be used to benefit the secondary business or invested opportunistically with high performing managers.
Other pensions that have made commitments include Employees’ Retirement System of the State of Hawaii (up to $100 million), New Mexico State Investment Council (up to $100 million), Texas Employees Retirement System ($87.5 million) and San Antonio Fire and Police ($20 million), according to media reports.

Founded in 1989, Landmark is led by Managing Partners Francisco Borges and Timothy Haviland and has its headquarters in Simsbury, Connecticut. The firm buys interests in venture, buyout, mezzanine, real estate and real-asset limited partnerships. The private equity platform is managed by Partners Ian Charles, Barry Miller, Robert Shanfield and James McConnell.

Landmark has raised 29 funds since its founding in 1989, according to its website, and ranks eighth among secondaries managers by total capital raised in the past 10 years, per Preqin. Its previous PE vehicle closed in 2014 with $3.3 billion.

Action Item: Check out Landmark Equity Partners XVI’s Form D filing here.

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