Interest in secondaries strategies has been running hot this year, but the latest evolution of private equity liquidity solutions takes things one step further: tertiary funds.
In the same way that secondaries funds buy up primary interests, tertiary funds focus on buying discounted stakes from investors in secondaries funds and continuation vehicles.
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This week, Cinven alum Caspar Berendsen announced that his firm, Netley Capital, has raised $315 million for a debut tertiaries fund, one of the first of its kind.
The firm is targeting a total raise of $600 million, including a debt facility, and plans to acquire roughly $800 million of assets over four years. The firm is targeting a final close by Easter next year, Bloomberg reported, though expects to close its first transaction in the coming weeks.
There is already some precedent — Bex Capital, acquired in April by Canadian asset manager Sagard, has raised a series of funds focused on secondaries transactions for private equity funds of funds, secondaries funds, and coinvestment funds.
Berendsen, however, says his new fund is the first dedicated pool of capital to buy secondaries stakes in secondaries funds.
“This is new — it is proper innovation in private equity,” he told Bloomberg. “We’re sort of at the inflection point where tertiary funds are becoming a real need and the market is growing into this.”
He said tertiary deals are about 1 percent of the secondaries market, and that most existing participants pursue such trades opportunistically rather than as a core strategy. He also pointed to reluctance among large secondaries managers to sell limited partner stakes to direct competitors, creating an opening for a dedicated buyer to intermediate these positions.
Netley will target mature secondaries portfolios in years four to six with a buy‑and‑hold approach as underlying funds run off and distribute, Berendsen said.
The fund is expected to hold 35–40 positions, each in a diversified secondaries fund, resulting in exposure to thousands of underlying companies — the primary focus is mid‑ and large‑cap buyout portfolios, including single‑ or multi‑asset continuation vehicles.
“Achieving this amount of committed capital in a relatively new segment of the market reflects the current need and future potential of the strategy. While the concept is new, the manner of investing is not. We are developing a market where demand far exceeds supply,” said Berendsen. “We have developed a strong deal pipeline and expect demand to continue to grow.”