Dry Powder: The Private Equity Podcast The Rise of the Secondaries Market: From Backwater to Boomtown
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Jan 16, 2024 Nigel Dawn, senior managing director at Evercore, discusses the growth and development of the secondaries market over a 20-year period, exploring tools and strategies such as securitizing LP interests, selling notes in the bond market, and utilizing NAV loans. They also highlight the benefits of GPs retaining their investments, the use of continuation vehicles, and the potential growth and constraints of the secondary market in private equity.
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Market Growth And Stigma Disappeared
- The secondaries market has grown from about $6bn two decades ago to roughly $120bn recently, shedding its stigma.
- Nigel Gaugh says selling LP interests is now seen as smart portfolio management rather than a sign of failure.
From Simple Sales To A Full Toolkit
- The secondary toolkit expanded from simple LP interest sales to securitizations, NAV loans, and GP-driven continuation funds.
- Nigel Gaugh highlights that both LPs and GPs now actively use these varied liquidity mechanisms.
Offer Optional Liquidity With Continuations
- Use continuation funds to give LPs optional liquidity while preserving GP control and upside.
- Structure deals so investors can either take a solid realized return or roll into the new vehicle to stay exposed.