Adams Street’s Jeff Akers, Partner & Head of Secondary Investments, explains how secondaries can provide liquidity opportunities, which can help investors to rebalance their portfolios and manage duration and diversification.
- The secondary market provides an avenue for private equity investors to generate interim liquidity by selling fund interests mid-cycle, making secondary transactions a valuable portfolio rebalancing tool.
- Secondaries investors can benefit from the “Three Ds” of Discount, Duration, and Diversification. Purchasing quality assets at a discount to net asset value later in a fund’s life cycle can reduce blind pool risk, shorten holding periods and help investors to build a portfolio spread across multiple dimensions including general partner (GP), sectors, vintages and geographies.
- An increasing share of secondary market activity is driven by GP-led transactions. These allow private equity managers to hold on to top-performing assets via continuation vehicles, and give existing investors the choice to exit or reinvest, therefore providing an opportunity to generate liquidity or to participate in longer-term value creation.
Notes
Source: Jefferies Global Secondary Market Review, January 2025, Page 7.
Assertions related to industry entry points, diversification, duration, blind pool risk, and resilience of asset class with strong returns and lower volatility generally based on Burgiss data as of June 30, 2023. Burgiss is a recognized source of private equity data, and the Burgiss Manager Universe includes funds representing the full range of private capital strategies; however, it may not include all private equity funds. Data and calculations by Burgiss, sourced on October 26, 2023.
Past performance is not necessarily indicative of future results and there can be no assurance that any such unrealized investments will ultimately achieve a liquidation event at the value assigned by Adams Street Partners or the General Partner of the relevant Investment, as applicable. “Discount” is estimated as purchase price as a % of total value during the first quarter the transaction is reported. There can be no guarantee that such estimates are accurate, nor can there be any guarantee that such investments will ultimately be successful or that Adams Street will be able to realize any such discount or other growth with respect to such investment. Further, there can be no guarantee as to the timing or attractiveness of liquidity for any such investment.
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