EUROPE - AXA Private Equity (AXA PE), the $28bn (€22bn) European private equity fund of funds firm, has revealed that it has raised $8bn since December 2010 for its Secondary Fund V and other early-secondary and primary funds.

Of that, $7.1bn has been committed to secondaries, which fund of funds managing director Vincent Gombault claims to be the largest secondaries fundraising the market has ever seen.

With Lexington Partners closing a $7bn fund in 2011 and Coller Capital nearing the close of a $5bn fund, according to sources familiar with the situation, the AXA PE announcement reflects huge opportunity in - and institutional investor appetite for - private equity secondaries.

Gombault told IPE that AXA PE started fundraising in December 2010 with a target of $3bn-4bn, but that limited partners (LPs) had been happy to make large commitments and see the objective raised as the firm pressed ahead with successful acquisitions of large portfolios.

In 2011 AXA PE bought a $1.7bn portfolio from Citigroup, a $740m portfolio from Barclays and a majority stake in a portfolio from HSH Nordbank, and the past two years have seen it make a total of $6bn of acquisitions.

After accounting for co-investments and other structures, this represents 42% of the new Secondary Fund V that is already invested.

The firm now manages $19bn in 800 secondaries. Its Secondary Fund IV, which closed at $2.9bn in 2007, is fully invested.

"I still have five years in which to invest [Secondary Fund V]," said Gombault. "But the fund will be fully invested within two years because the banks still have a lot of assets to sell."

AXA PE estimates that banks will ultimately divest from $40bn-50bn worth of assets.

"The other sellers are pension funds," Gombault said. "Not because they want to get out of private equity, but because governance and resource constraints mean they have to cut their GP relationships down from hundreds to perhaps 50 to 60."

Indeed, the Barclays portfolio that AXA PE acquired for Secondary Fund V came from the bank's pension fund.

This has not meant dampened enthusiasm for secondaries from pension funds - Gombault reports commitments from several new private and public sector US pension funds, which have replaced the money it would previously have raised from banks, which are now constrained from investing in private equity by Basel III, Dodd Frank and Volcker regulation.

European pension funds remain at a similar proportion as in previous AXA PE funds, less than 10%, which has meant a significant decline in European assets as European banks have withdrawn from private equity.

However, Gombault also reports that all of AXA PE's previous insurance company clients have re-upped, and have been joined by several new names.

"The expectation that insurance companies would cut their commitments because of Solvency II has turned out to be totally wrong," he said.

Overall, 95% of AXA PE's clients have re-upped, representing 50% of the new commitments - meaning half of the new money raised comes from clients new to the firm.

"First of all, it's been about taking advantage of the market opportunity - the banks and pension funds selling assets," said Gombault in response to IPE's question about why so much money is being raised in secondaries.

But he also emphasised the attractiveness of mitigating the j-curve and getting a clear view on the assets that investors are buying, as well as what it says about the broader evolution of the private equity industry.

"No institution can afford to hold positions for 10 or 20 years anymore - every market needs liquidity," he said.

"You have secondary liquidity in every large, efficient market, from US Treasuries to cars. Now we begin to see a very active secondary market in private equity."