Pantheon Plugging Away on Secondaries Fund

Pantheon International, a listed UK investment firm, has raised $950 million toward its fourth fund aimed at the private equity secondaries market, according to a regulatory filing. That’s a modest rise from the $343.6 million it had a year ago but a testament to the fact that investors are willing to get behind secondaries funds, slowly.

Pantheon’s fund, Pantheon Global Secondary Fund IV LP, has a target of $4.75 billion according to a regulatory filing. However, an April report from Probitas Partners pits the fund’s target at $3.75, so the $4.75 billion figure may be a hard cap. Its prior effort, a 2006 vintage, had $2 billion in commitments.

I would be willing to wager that the firm lowers its sights. That’s a big fund as far as secondaries go, topped only by Goldman Sachs, Coller Capital, and Lexington Partners. If the firm hasn’t passed the halfway point after a year like this one, I have suspicions about its ability to do so in the future. Indeed, the bloom is off the secondary rose (if it ever was blooming). Buyers of unwanted private equity commitments were the hottest strategy around at the beginning of this year, but the deal flow just hasn’t caught up to the fundraising excitement. Its possible LPs are starting to cool to secondary funds.

Earlier this week David Tom pointed out a key issue facing secondary investors: “Black Friday Syndrome.” It’s the idea that secondary investors, like Black Friday shoppers who put themselves through hell for a few deals, are so hungry to invest in something that they just might buy anything that looks OK, even if they don’t really want it, just to justify the fund they’ve raised. Meanwhile, secondary prices are going up and the feast of amazing deals we all expected seems to exist only in theory. All this bodes poorly for secondary funds currently in the market.

While we’re at it, here’s a look at the progress of several other large secondaries funds that we reported on in March (Hint, it’s no better!).