PEI Secondaries Investor 5.30.14 (PDF version)
By William Amofah on 30 MAY 2014 in Commentary, Q&A
Last month, Connecticut-based Eaton Partners became the latest placement firm to enter the secondaries advisory market, hiring a three‐person team that formerly ran the secondary advisory business for Atlantic-Pacific Capital. We caught up with partner Jeff Eaton to learn why the firm has launched this new business line and what it’s seeing in the marketplace.
Why has your firm decided to enter the secondaries advisory market?
We see secondaries as complimentary to the primary side of our business. There are many GPs out there that may benefit from a secondaries transaction or fund restructuring. And we can use the secondaries market to find new primary GPs. Not that many advisors have launched secondaries advisory businesses, but we do anticipate there to be more competition.
Will you also advise on secondaries across other alternative asset classes?
Yes. We have expertise and experience across four main silos of alternative assets:private equity, which includes buyouts, venture, special situations and debt‐focused strategies; real assets, which includes energy, natural resources, infrastructure and commodity-focused strategies; real estate; and hedge funds.
Do you expect to spend more time advising on the buying and selling of fund stakes, or on other types of deals that have attracted secondary buyers such as spin-‐outs and fund restructurings?
We are actively working with several GPs right now to manage their existing LP bases and replace older relationships with new, long-‐term sources of capital through strategic secondary transactions. We believe these types of transactions, as well as full fund recapitalisations/restructurings, will be a main driver of deal volume over the new few years.
People are talking about record deal volumes for the year; do you think this will this be the case?
Yes, we think so. The private equity secondaries market is already on pace to surpass last year. We are seeing a robust market. Historically, GPs and LPs felt that they were admitting mistakes by selling fund stakes or putting their fund up for restructuring – it was a black mark. But sellers are starting to realise that using the secondaries market is the smart thing to do. With secondary transactions becoming more prevalent, the reputational risks are far less, so secondaries are a good portfolio management tool to have.
How would you characterise activity during the first half of the year?
We see a trend up in terms of pricing. There are a lot of buyers and record amounts are being raised for secondaries investment.
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