Secondaries

Transactions for buying interests in later-stage investments from private equity funds, established real estate property portfolios, and/or single assets from existing investors rather than making initial originations.

In private equity, this type of investing spans across the complete company lifecycle from venture capital to buyout and special situations investing. For real estate, secondary investments occur in later phases of property development.
Investments can take two forms:

• Limited Partner-led (LP) transactions involving an LP’s stake in a private fund. The purchaser of the stake takes on the rights and obligations of that LP in the existing fund or real estate portfolio. LP-led transactions provide current fund investors with liquidity (typically at a discount) prior to the end of the investment lifecycle.
• General Partner-led (GP) transactions involve transacting on one or more assets of an existing private fund. GP-led transactions provide GPs with additional flexibility beyond a traditional asset lifecycle to unlock additional value or to optimize exit opportunities.

By buying in at a later stage through secondaries, investors assume less duration risk compared to investing in a blind pool at inception. Secondary investing may provide investors with portfolio benefits including earlier return of capital, J-curve mitigation, reduced blind pool risk and the ability to purchase quality assets at a material discount to net asset value.