Secondaries - what do you actually do
Know a lot of people harp about how you get a greater level of variation/diversification in transactions in secondaries PE. What is an example of this and what do you actually do (know that you buy assets from GPs or LPs seeking liquidity at a discount or appreciating from year-on) Can someone provide a sample engagement. Also why may someone prefer working in this space than direct pe apart from wlb
In the realm of secondaries private equity (PE), professionals engage in a variety of tasks that revolve around purchasing existing PE investments from original investors (General Partners or Limited Partners) who are seeking liquidity. This can include assets like stakes in funds or portfolios of direct investments. Here’s a breakdown of what you might expect in terms of daily activities and why some might prefer this area over direct PE:
Transaction Variety and Diversification: In secondaries, you deal with a broad spectrum of transactions. For example, you might work on a deal where you're buying a portfolio of stakes across several funds, which could include a mix of venture capital, growth equity, and buyout funds. This variety allows for exposure to different strategies, geographies, and sectors within a single transaction, enhancing diversification.
Sample Engagement: A typical engagement in secondaries might involve conducting due diligence on a portfolio of fund interests being sold by a pension fund. This process includes analyzing the historical performance of the funds, understanding the underlying assets in these funds, forecasting future cash flows, and assessing any potential risks. The goal is to determine a fair purchase price that reflects a discount to the net asset value, considering factors like the remaining fund life and market conditions.
Reasons for Preference Over Direct PE:
These elements make secondaries an attractive field for many finance professionals, especially those who value a diverse exposure to different investment types and a potentially more predictable work schedule.
Sources: Secondaries PE - Any insight on work and lifestyle?, Direct PE to Pension/Endowment, Why Direct when you can invest in Secondaries?, Secondaries Comp / Culture in 2023
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