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 DLJ Strategic Partners L.P., with approximately $832 million in committed capital, seeks capital appreciation through the purchase of secondary interests in high-quality private equity funds from investors seeking liquidity prior to the termination of those funds. DLJ Strategic Partners pursues secondary opportunities primarily in leveraged buyout and mezzanine funds, although real estate, venture capital, distressed securities and fund of funds are also considered.
THE SECONDARY MARKET
The growth in secondary investment opportunities is mainly a function of two factors: (i) the overall growth in the private equity market and (ii) increasing turnover rates. From 1996 through 2002, commitments to private equity have increased significantly, with over $608 billion of capital committed to newly formed private equity funds in the US. Simultaneously, certain investors have become increasingly proactive in managing their private equity portfolios, choosing to sell interests for asset allocation, risk management, cash flow or other strategic reasons. Recent increased market volatility, regulatory changes such as capital reserve requirements for financial institutions and consolidation in the financial sector have also caused certain investors to rethink their allocations to private equity, which may be considered by such investors to be a non-core asset. This combination of factors has resulted in greater turnover in private equity investments. The expansion of private equity funding and the interest in liquidity options have not been matched by a growth in secondary funds. Because there are few established secondary purchasers in the market, DLJ Strategic Partners believes it is well-positioned to take advantage of the rapid growth in private equity capital and the growing demand for liquidity options in the secondary market.
COMPETITIVE ADVANTAGES
DLJ Strategic Partners benefits significantly from Credit Suisse's top market positions in private equity, fund placements and high yield, areas that are vital to sourcing and evaluating secondary investments. Credit Suisse Private Equity is the global leader in private equity investing and the investment experience of its professionals provide industry perspectives which augment DLJ Strategic Partners' investment analysis. Credit Suisse's Private Fund Group is the #1 placement agent for private equity funds globally, and its relationships with fund sponsors and investors provide attractive secondary deal flow. Credit Suisse's High Yield unit, ranked the #1 global high yield underwriter and the #1 global high yield research group, is a valuable resource in evaluating portfolio companies and in developing relationships with private fund investors.
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