Secondary Investment

Secondary funds invest in already-established funds, acquiring interests from investors seeking liquidity. Pantheon was a pioneer of secondary investing and established Pantheon International Participations (PIP) in 1987, one of the world’s first dedicated secondary funds.

Pantheon is now among the largest investors in secondary transactions in the world, and has over US$6 billion in secondary assets under management.

Pantheon recently won the Private Equity News European Secondaries Firm of the Year 2011.

Our people

We have a team of more than 25 investment professionals who focus on secondaries. The team exhibits a deep level of global investment experience within the private equity industry (more than 200 years in aggregate), combined with longevity at Pantheon (nearly 150 years), as demonstrated in their biographies.

Our strategy
Pantheon aims to invest in diversified portfolios of appropriately priced, high quality private equity assets. This includes, but is not limited to:

> interests in private equity funds
> portfolios of direct company assets
> hybrid/mixed fund and direct portfolios

Among the features that characterise our investment strategy are:

> Portfolio diversification

We seek to diversify our secondary fund assets by vintage year, sector, industry, stage and geography.

> Global portfolios

Local presence and depth of resources in the major private equity markets worldwide enable us to maximise our competitive advantage in global transactions.

> Focus on manager and asset quality

The foremost consideration informing our secondary investment strategy is manager and asset quality. Our focus is on funds from strong management groups, with a close alignment of incentives within the manager. We look to develop a diversified portfolio of quality underlying assets with the characteristics to provide upside potential as well as resilience in downside scenarios.

> Deal focus

We have the requisite expertise to undertake the full range of secondary transaction types and sizes.

> Synergies with our primary activities

We always aim to leverage the knowledge and due diligence information of our primary fund teams and global offices.

Case Study: Structured transaction to limit downside risk

The transaction and deal structure

> Fund A has a limited amount of capital left to support existing portfolio
companies, some of which may be at risk of default or failure if no additional funds are available.

> Pantheon implemented a structured transaction where secondary funds provided additional capital in exchange for a preferred return (all cash returns from Fund A companies accrue to the Secondary Funds until a hurdle rate is achieved).

> The existing limited partners accepted dilution in order to optimise the returns from the fund.