Asian flows help $1.75bn Pomona fund beat target

Asian investors comprise nearly a fifth of private equity secondaries fund Pomona Capital VIII, with allocations from pensions, sovereigns, insurers and family offices.
Asian flows help $1.75bn Pomona fund beat target

Pomona Capital’s latest private equity secondaries fund has attracted more Asian limited partners (LPs) than its predecessors, with about 20% of capital commitments coming from the region.

Launched in late 2012, Pomona Capital VIII closed last week at $1.75 billion, exceeding the initial target of $1.3 billion and was oversubscribed. About 60% of the firm’s existing LPs invested in the new fund.

“We had a significant increase in interest in the fund from Asian investors”, chief executive Michael Granoff tells AsianInvestor. They include pensions, sovereign wealth funds, insurance firms and family offices in the region.

Predecessor Fund VII had closed in 2009 at $1.3 billion, exceeding its $1 billion target. The proportion of Asian investors in the latest secondaries fund represents a “large increase” compared to Fund VII, says Granoff.

He declined to give the internal rate of return for Fund VII, but says Pomona’s secondaries fund, as a group, have generated returns in the high teens over the last 20 years.

Pomona’s strategies acquire existing investor interests in buyout and venture capital funds, in addition to portfolios of PE-backed companies.

The firm views the US as having the most attractive secondaries opportunities at the moment, in that it offers the best risk/reward ratio. “The US economy, while it has grown slowly, has grown steadily,” says Granoff. “The risk side is relatively low, compared to other markets”,  given the market’s maturity and established financial regulations.

Pomona’s standpoint differs from that of Hamilton Lane, which last year closed its Secondary Fund III at $900 million and sees potential opportunities in the acquisition of existing LP stakes in PE funds focused on India and China.

Granoff adds: “The opportunity set changes over time and so the picture that appears today may not be the picture of tomorrow.”

Pomona is keeping a watch on developments in the eurozone, which is in the early stages of an economic recovery, and also Asia.

“Asia has different economies and different market situations,” says Granoff.  “Our challenge is to find those places where we can buy the quality of assets that we want, at a price that makes sense to us.”

Pomona is looking at potential opportunities in South Korea, where it has investors, although Granoff declined to detail them.

Aside from secondaries, New York-based Pomona – which runs $8.5 billion in AUM – also manages a series of funds of PE funds and co-investment vehicles.

In the Asia Pacific region, Pomona has offices in Sydney and Hong Kong. The latter is a two-person operation overseen by John Stephens, who joined in the firm in 2011 from EMAlternatives, an emerging markets-focused PE fund of funds.

There is also a senior associate in Hong Kong, Martin Yung, who focuses on investment analysis and deal sourcing in Asia. He joined Pomona last year after four years at secondaries PE firm Paul Capital.

Paul Capital is in the process of closing its offices in Hong Kong, New York, London and São Paulo as part of a firm-wide consolidation.

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