Investment Management – Secondaries Bulletin June 30, 2021

Investment Management, Trading & Markets – Secondaries Update – Q2 2021


In May, London partner Saloni Joshi moderated the discussion ‘Secondaries: State of the U.S. and European Markets’. Panelists from Jefferies, Tikehau Capital North America, and CPP Investment Board provided their insights.

Some of the key themes discussed included current market trends, deal structuring, and the growth of the private debt secondaries market. 

Andy Nick of Jefferies gave an excellent presentation on the Current Secondaries Market and its projections for Q3/Q4.* In their view, the LP market has largely rebounded to pre-COVID-19 levels, with many sellers looking to rebalance their portfolios following substantial NAV write-ups from Q3 2020 through Q1 2021, while others are actively taking advantage of historically high pricing for certain high-quality funds. They are seeing sponsors continue to pursue GP-led transactions to provide liquidity to existing LPs while simultaneously setting up roll-over investors to benefit from the expected future value appreciation from the best assets in their portfolio. Andy noted, ‘Current conditions in both the LP and GP-led segments of the market lead us to believe that the second half of 2021 could be the biggest the secondary market has ever seen.’ 

Another key topic was Private Debt Secondaries, a market that has seen increasing growth through 2021. Olga Kosters of Tikehau Capital gave us her thoughts on the market and typical deal structures. Private debt secondaries follow the growth pattern of private debt primary funds. Much like private equity funds, sellers are also interested in exploring liquidity options, while GPs aim to diversify their investor base. In Olga’s view, the value these types of transactions provide for investors is ‘exposure to a diversified pool of assets with a relatively stable income, and a shorter duration compared with private equity secondaries’. On the market opportunity in this space, Olga noted, ‘If there is an intelligent underwriting of credit risks, this market presents an interesting opportunity set and is certainly worth exploring.’

Private debt deal structures are also varied, and Olga has seen a great deal of creative thinking behind tailored GP-led structures. Some of the structures employ evergreen features that used to only be in the domain of large capital providers like insurance companies, but these are becoming more mainstream. Another interesting development, in her view, is GP-led transactions with senior equity and junior equity split to provide for risk-sharing between secondary investors and GPs. There is clearly a great deal of innovation and creativity for a new market contender in this space.


This quarter’s market snapshot is provided courtesy of PEFOX LLP:

  • Private equity secondaries pricing has reached a multi-year high at an average level of 99.0% on Q4 2020 NAV. (See PEFOX Library for a line-by-line breakdown.)
  • Pricing has not only recovered from the COVID-19 shock last year but, in fact, pushed significantly higher. Further, we are presently seeing the highest number of par/premium level pricing points on record.
  • As the pendulum has swung and a number of investors now perceive greater risks to the downside, we have seen a sea change in the appetite for secondaries. LPs no longer see a benefit in waiting and are actively taking advantage of the wall of money chasing secondaries to sell and de-risk their portfolios. 
  • Overall, we anticipate these favourable market conditions to continue for much of this year. The question is really, at what point (if any) do buyers start to get nervous and rein in pricing.


The secondaries market continues to evolve, but liquidity remains at the heart of all transactions. Limitations of fund structures and the search for value-creation opportunities have led to the rise of GP-led transactions and the use of increasingly innovative and complex structures. Sponsors can secure follow-on capital for follow-on assets and gain additional valuable time for growth, while investors can choose to remain exposed to well-performing assets but also have the option of liquidity. 

We have advised on multiple GP-led transactions this last quarter, ranging from fund tenders to single-asset transactions to multiple-asset continuation funds. One consistent theme is that a fair and transparent process is paramount, particularly regarding fees, conflicts, and timing of these liquidity events. The willingness of GPs to acknowledge and welcome this new collaborative landscape will effectively determine whether the success of the last few years will remain.


A common misconception around secondaries and environmental, social, and governance (ESG) is that secondary funds have less ESG focus and/or the potential for influence. However, distinct from primary blind pool mandates, secondary players have the advantage of being able to analyse the existing underlying companies already in a portfolio from an ESG point of view. This, of course, requires the secondary player to have the appropriate resources to do this, particularly for large portfolio sales with potentially hundreds of underlying portfolio companies. 

On the other side of the coin, there are instances when investors are selling on the secondaries market due to ESG-related concerns. Perhaps one of the managers in their portfolio has fallen short of their ESG standards, or the investment focus of investors has become ‘greener’, leading to a divestment of certain investments on the secondary market.

Our firm has a multidisciplinary ESG Advisory Group that assists fund managers and investors to understand the evolving ESG landscape, including ESG compliance and governance. Our ESG Advisory Group can provide helpful guidance on the process of implementing strong sustainability programs that serve as key indicators of reliable financial performance. 

In February, London partner Saloni Joshi moderated the discussion ‘ESG and Impact Investing in 2021: Considerations for Fund Managers, Investors, and Other Market Participants’. She was joined by panelists from Bloomberg, ERM, HarbourVest, ILPA, and Pollen Street Capital. A recording can be accessed here


We are pleased to announce Megan Lau joined the London office as a senior associate. Megan is an investment funds lawyer with experience in secondary transactions, co-investments, fund formation, and LP representation. Megan was included in Secondaries Investor's list of secondaries Next Gen Leaders 2020 (brightest young stars in the secondaries universe).

Secondaries Update is produced by Alston & Bird’s Financial Services & Products Group and is edited by Saloni Joshi, Rob Davidson, and Megan Lau.

* Jefferies is happy to share their presentation slides on request.
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