After a record setting 2021 for the secondary market, climbing inflation, rising interest rates, the Russia-Ukraine conflict, and ongoing supply chain issues have contributed to significant uncertainty for financial markets in 2022. In the near term, we believe the ongoing disruption can serve as a catalyst for increased selling activity and more attractive pricing and terms for secondary buyers. For secondary investors in GP-led transactions, the market dynamic is creating a greater supply of high-quality, lower-risk profile opportunities supported by the continuity of the existing sponsor.
Despite the more turbulent landscape, GP-led deals continue to represent a significant source of future growth in the secondary market, providing:
- GPs with the ability to extend their ownership of trophy assets and greater flexibility to manage their portfolios
- Portfolio companies with more time, and potentially capital, to maximize their value creation potential
- LPs with more liquidity options and flexibility to manage private markets allocations, and
- New investors with access to high-quality companies managed by established sponsors, with the potential for meaningful upside, that wouldn’t ordinarily trade on the secondary market
This report charts the evolution of GP-led deals and explains why we believe they present an attractive investment opportunity. It also outlines the distinct role that these transactions can play in investors’ portfolios as more volatile market conditions drive the need to optimize portfolio construction, both in terms of alpha generation and risk management.