What are Secondaries?
It all begins with an idea.
Secondary investments are when an investor buys an interest in a fund or a portfolio of funds from an investor rather than providing capital during the fund’s raise.
Secondary investors can buy interests from both GP-led and LP-led transactions.
GP-Led Transactions
It all begins with an idea.
A GP-led transaction is when the GP (General Partner) initiates a process to provide LPs with liquidity and/or restructure ownership of one or more assets, typically by moving them into a new vehicle.
This can take the form of different types of transactions, the most common of which being single-asset and multi-asset continuation funds. Other GP-leds include tender offer, strip sale, preferred equity, GP-interest, stapled primary, and other forms of fund restructuring.
What is a Continuation Fund?
A continuation fund is a new fund created by the GP where one or more assets from a previous fund moves into a continuation vehicle. This is created for many purposes, with the primary reasons including providing legacy investors with an option for liquidity, extending the holding period of assets, continue to realize upside on a marquee asset, refresh economic terms, and optimize exit opportunities.
In a continuation fund, legacy investors have the option to roll over or cash out, where they can choose to reinvest into an asset they already had previous exposure to. Oftentimes, continuation funds are created when the fund is more mature and when uncalled capital commitments are low. Thus, creating a continuation vehicle allows the GP to inject fresh capital into an asset, allowing the GP to continue to invest in a marquee asset. This also gives GPs the ability to refresh economic terms, which include changing the waterfall structure from the LP preferred return (hurdle rate), management fees, and GP carry. Additionally, especially with the recent growth of GP-leds from the growing use of continuation funds, moving one or more historically well-performing assets means GPs can extend the holding period of a marquee asset and continue to realize upside. Finally, extending holding could also mean optimizing exit opportunities for when the exit environment may be more favorable.
What is a Tender Offer?
A tender offer is a GP-initiated one-time liquidity window where LPs can sell some or all of their fund interests to secondary investor instead of waiting for the typical cash distributions. This is
Blog Post Title Three
It all begins with an idea.
It all begins with an idea. Maybe you want to launch a business. Maybe you want to turn a hobby into something more. Or maybe you have a creative project to share with the world. Whatever it is, the way you tell your story online can make all the difference.
Don’t worry about sounding professional. Sound like you. There are over 1.5 billion websites out there, but your story is what’s going to separate this one from the rest. If you read the words back and don’t hear your own voice in your head, that’s a good sign you still have more work to do.
Be clear, be confident and don’t overthink it. The beauty of your story is that it’s going to continue to evolve and your site can evolve with it. Your goal should be to make it feel right for right now. Later will take care of itself. It always does.
Why Secondaries vs. PE?
It all begins with an idea.
Much of the work for secondary investors, similar to those on the investment team in private equity, is underwriting and evaluating various assets. This includes sensitizing for risk, evaluating the returns of an investment, and developing judgment when dealing with incomplete information.
However, as a secondary investor, while you often do single-asset diligence (for single-asset continuation vehicles), which is similar to the work in private equity, you’re often evaluating an entire fund or a portfolio of funds. This means often evaluating tens of businesses at once; you get more breadth but less depth.