HarbourVest Partners Launches Mezzanine Co-Investment and Real Assets Funds

Apr 7 2017 | 6:48pm ET

Global private markets investment manager HarbourVest Partners has raised $375 million and $366 million, respectively, for its inaugural mezzanine-focused co-investment fund and its third real assets fund.

The company’s Mezzanine Income Fund I was oversubscribed and closed well above its $250 million target. The fund’s hard cap was $375 million. 

HarbourVest’s approach to the mezzanine market enables investors to access companies primarily in the U.S. lower middle market, the company said in a statement, and across some of the very best managers who invest in this area. This access is achieved via a differentiated mezzanine-equity strategy.

“What differentiates HarbourVest is our strong equity orientation, which brings with it a unique way of looking at mezzanine and engaging with GPs,” said Peter Lipson, managing director of HarbourVest, in the statement. “Our roots in equity allow us to be more agile in terms of how we structure deals. It also better aligns us with the sponsor and makes us a more valued mezzanine partner.” 

“HarbourVest has been investing in mezzanine since 2003, and over the last decade we’ve seen consistent growth in the demand from private equity sponsors for mezzanine debt partners to help complete transactions,” added Lipson. “Our dedicated mezzanine debt solution will continue to differentiate HarbourVest as a preferred partner to GPs, while being highly complementary to our direct co-investment equity business –particularly in terms of accessing and evaluating deals.”

Meanwhile, HarbourVest’s Real Assets Fund III is the company’s first commingled real assets fund. The secondary vehicle closed well above its $300 million target. 

The new fund’s strategy will leverage HarbourVest’s Dover Street secondary investment approach and apply it to the less competitive but fast-growing real assets market. The fund’s objective is to invest opportunistically across the energy, power, infrastructure, and natural resources sectors, the company said. 

“The real assets market has gone from a niche component of the broader secondary market to a level of maturity where it is now viewed as a segment standing on its own,” said Kevin Warn-Schindel, managing director at HarbourVest. “The dynamics of this early stage maturity is comparable to the early days of the PE secondary market itself, where the growth in the demand for liquidity continues to lag the availability of capital to provide it. 

“As the market continues to mature we are seeing more GP spinout and GP-led transactions trickle into the space,” he added.

Limited partners in both funds, more than half of which are new to HarbourVest, consist of pension funds, insurance companies, endowments and family offices across the U.S., Canada, Latin America, Asia and Europe.

Founded in 1982 and headquartered in Boston, HarbourVest manages more than $40 billion in primary fund investments, secondary investments, and direct co-investments in co-mingled funds or separately managed accounts. The company, which raised $4.77 billion last fall for its Dover Street IX secondaries fund, has completed over $15 billion in secondary purchases, and invested more than $6 billion directly in operating companies. 

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