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Private Equity

Market innovations could play part in surge of activity

Innovations in the secondary markets are also driving increased secondary market transactions, said Eric Albertson, senior investment director, private equity for Aberdeen Standard Investments, Boston.

One example is a fund that might have a single asset left, which the general partner doesn't want to sell yet because it has not realized its full value, Mr. Albertson said. In these situations, the single asset is being spun into a new fund, with limited partner approval, giving the private equity manager another three or four years to exit the investment, he explained.

An example of a single asset deal occurred in May, when the University of Michigan committed $26 million to Lime Rock Partners IV AF, a natural resources fund that will invest in a single asset, CrownRock Resources, a joint venture between Lime Rock and CrownQuest Operating LLC. CrownRock Resources had been an investment of energy fund Lime Rock Partners IV.

The university had invested in Lime Rock Partners IV in 2006 and now the fund is at the end of its life with the single remaining asset. Lime Rock executives think there is still a potential upside in the remaining asset, according to a university report. So the university rolled over its interest in Lime Rock Partners IV into the new fund and increased its commitment to Fund IV AF by an additional $25 million.