Middle-market buyout shop Charlesbank Capital Partners LLC agreed to buy a stake in Overbay Capital Partners Inc. in a deal that values the Canadian secondaries firm at $200 million, according to people with knowledge of the matter.

Boston-based Charlesbank is making a strategic investment from its funds, according to a statement seen by Bloomberg News. Overbay will remain a significant long-term shareholder “and retain complete control and independence of all investment activities,” the statement said.

“They are helping us grow in our next phase,” Overbay chief executive Robert McGrath said of Charlesbank, adding the investment will help the firm strengthen capabilities in data, analytics,

artificial intelligence

and investor relations, and attract the “best talent.”

The size of the deal wasn’t disclosed and McGrath declined to comment on Overbay’s valuation. The transaction is expected to close by mid-year.

Founded in 2016 by McGrath, Overbay focuses on buying mature private equity fund stakes from existing investors. The Toronto-based firm manages US$3 billion in assets and invests across several sectors such as technology and sports.

The secondhand market has boomed in recent years as higher interest rates curbed dealmaking, which in turn slowed cash distributions to investors and made it hard for firms to raise new pools of capital. Last year, secondaries transaction volumes surged 41 per cent to US$226 billion, according to a report from Evercore Inc.

“As institutional and private investors increasingly seek liquidity solutions for their alternative asset portfolios, the firms that can deliver consistency and sophistication at scale will define the next chapter of private markets,” Charlesbank chief executive Michael Choe said in the statement.

Traditional buyout firms are pushing into this corner of the market either by building teams in-house or through acquisition. Earlier this year, EQT AB agreed to buy Coller Capital Ltd. for US$3.2 billion to gain a foothold in the market.

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Charlesbank was founded in 1998 after spinning out from Harvard Management Co. Inc., which manages the university’s endowment. As of Sept. 30, Charlesbank oversaw US$20 billion of assets across buyout and credit strategies, and had a team of more than 165 employees, according to its website.

Bloomberg.com