Specialist
Former Relationship Manager at Lazard Asset Management LLC
Agenda
- Catalysts and timelines for alternatives market activity and value-accretive scenarios
- Key topics of negation in transactions and likely deal flow
- Secondaries market stress areas, discussing impact of higher financing costs on transaction volumes and expected investor returns
- Competitive positioning within secondaries, looking at new entrants and how they impact fund returns
Questions
1.
In our previous Interview [see PE Secondaries Market – Future Deal Volume & Valuations Update – Part 1 – 26 May 2023] we unpacked some of the different sectors and geographies you saw as opportunities within the secondary market. What do you think are catalysts for activity?
2.
You mentioned the denominator effect. To confirm, there’s a push on the mandate allocation side to be more overweight in public markets, but because of their poor performance, it’s making the private portfolio look much larger?
3.
Do you think there’ll be higher transaction volume in 2023 than in 2022?
4.
We’ve hopefully reached central bank hiking cycle peak rates, or terminal rates. I guess that gives LPs [limited partners] and GPs [general partners] more confidence to then transact in the market. To confirm, do you expect it to pick up towards the end of 2023? What do you think the key topics of negotiation are currently?
5.
Do you see it becoming harder to reach IRR targets?
6.
The other new dynamic that I think we’ve started to see over the last year or so is some funds started buying from themselves, so rolling a portco from one fund into a new fund or rolling exposure of certain assets into new funds. Do you think that artificially protects some rates of return?
7.
Do you see potential over-subscriptions to transactions, or have you seen this happen?
8.
What sectors or strategies do you think we’re seeing the most over-subscription for? On the GBP 500m-700m figure you mentioned, what would the over-subscription size be for that? Is it 1.5x, 2x, or less?
9.
How should we think about the competitive advantage between specialists, such as Landmark Partners pre or post its acquisition by Ares, and mega-fund competitors in the PE secondaries space?
10.
In our last Interview, we discussed some secondary funds expanding into GP-led transactions. As the market becomes more efficient, do you see scenarios whereby funds become vertical specialists, eg, they only pursue GP-led transactions for healthcare assets?
11.
It seems like there have been a lot of funds, for example Oaktree and Ares, that have been buying or building secondary platforms. Do you think this trend is going to continue? What does that do for returns, if competition increases?
12.
You’ve spoken about a lot of the merits of specialist platforms and how you can see growth in that sector, going forwards. Is there a shorter-term risk that some of the larger players could outcompete specialist platforms with lower funding costs?
13.
What do you think are the key pockets of stress in the market that are currently overlooked?
14.
Are there any final thoughts about the PE secondaries market that you want to leave future readers with?
