Neuberger Berman is planning to deploy a chunk of the $4.9 billion it has raised for second-hand private equity deals on so-called continuation funds, even as concerns over valuations cause other investors to cool on the sector.
The firm will invest in the private equity vehicles, which seek to raise additional cash to extend ownership of companies, according to Benjamin Perl, a managing director at the investment manager. In deals where the amount being sought is less than $1 billion, there is still a robust pipeline of opportunities, he said.
“It’s almost been an embarrassment of riches,” Perl said. The firm will also target smaller acquisitions from limited partners, he said. Such sellers often include sovereign wealth funds, foundations, family offices and pension funds.
The amount raised for Neuberger Berman’s latest fund announced earlier this week, NB Secondary Opportunities Fund V LP, is nearly double the size of its predecessor which wrapped up with $2.5 billion in 2018, he said.
The multi-billion dollar fundraising stands out at a time when institutional investors are souring on continuation funds, which private equity firms deploy when they want to keep managing assets in traditional buyout funds that are about to mature — often to avoid taking portfolio companies public prematurely or being forced to sell them at unfavorable prices.
Demand for such vehicles, which soared during the pandemic, tumbled in the first half of this year after hitting a record $60 billion in 2021, according to a report by Campbell Lutyens & Co., a private markets advisory business. In addition to providing an off-ramp for investors who want to cash out, continuation funds allow buyout firms — also known as general partners — to keep raking in management fees from existing or new clients.