AltamarCAM’s Views on Secondary Market
The secondaries market has experienced high growth over the years and still has great potential. It plays a key role in providing liquidity to LPs and GPs, especially important in the current environment.
Within the secondary market, GP-Leds have increased their share of the market over the last years. This type of secondary transactions has several advantages for buyers, such as the access to high quality assets and the ability to perform fundamental analysis, as well as advantages for the GPs which can access an alternative exit route.
Succeeding against a troubling backdrop (September 2023)- Read full article
Secondaries act as vital liquidity source in illiquid markets, with room for significant growth in the future. Strong returns1 and selective buyer’s market have attracted new investors, offering buyout-like returns with less volatility and a differentiated liquidity profile.
Recent private market trends show a slowdown in industry-wide distributions2, increasing the demand for liquidity. This scenario creates a favorable environment for buyers in the secondaries market.
Growth of the secondaries market has naturally led greater differentiation among buyer strategies. Our focus lies on GP-led transactions and smaller LP deals, where we can hand-pick high quality assets managed by top-tier sponsors. We have a competitive angle in these transactions via our primary program, and frequently invest in funds and sponsors from our existing portfolio.
A good moment for continuation funds (March 2023)- Read full article
Times of uncertainty offer the buyside a window of opportunity, while sellers can benefit from liquidity. In this market we continue to see selling volume driven by a need to generate liquidity.
The continuation fund ecosystem has matured. There are competitive processes, independent advisers are involved, and fairness opinions are provided to LP advisory boards. As a result, and according to our experience, we believe the majority of these processes could achieve a fair market price.
We continue to believe GP-led transactions offer among the best risk/reward opportunities in private markets investing because of the opportunity to target quality assets and sponsors.
AltamarCAM Partners on evaluating risk in GP-led deals (March 2022)- Read full article
The GP-led secondaries market is increasingly popular with sponsors that desire the optionality and flexibility to manage an asset outside of a traditional fund structure holding period. While some LPs may eager to see another path to liquidity for their holdings, GP-led transactions can also create some administrative challenges.
When evaluating a GP-led transaction, our due diligence process focuses primarily on four factors — motivation, alignment, quality, and pricing. These are key criteria that cannot be mitigated by structure or terms.
The tailwinds for GP-led transactions remains strong, and the market is expected to grow significantly3 over the next decade, necessitating substantial buy-side capital formation to keep pace with the opportunity set.
- Source: Pitchbook, “2022 Global Fund Performance Report”. Dispersion of private, closed-end fund net IRRs by strategy (vintages 2002 to 2016). Past performance is not necessarily indicative of future results, as current economic conditions are not comparable to past performance, which may not be repeated in the future.
- Figures 2,18, 19 & 20. https://www.bain.com/insights/private-equity-outlook-global-private-equity-report-2023
- https://www.ey.com/en_gl/podcasts/nextwave-private-equity/2023/03/episode-56-how-the-private-equity-secondaries-market-is-coming-of-age
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