What are secondaries in private equity and what is their appeal?
Private equity secondaries refer to transactions in which an investor is buying an existing interest or asset from primary private equity fund investors, known as limited partners (LPs). These transactions can be structured in a number of different ways based on the needs of the stakeholders involved. Secondaries have become an increasingly appealing segment of the private equity market, as they allow flexibility for LPs who may want to liquidate or rebalance a portfolio. Buyers of secondaries, meanwhile, may benefit from shorter duration and faster return of capital, potentially discounted access and enhanced transparency into the underlying portfolio or assets.
By investing in companies that provide essential products and services for stable end markets and resilient businesses with track records of success, investors may better mitigate exposure to volatility in any market environment. In our portfolio, we invest in general partner-led, single-asset secondaries. We typically target investments with track records beyond three years, as this initial period is considered the riskiest stage for private equity investment.