Multi-asset GP-led secondary transactions are expected to be favoured by investors through the second half of the year, according to a new survey.
Multi-asset GP-led secondary transactions are expected to be favoured by investors through the second half of the year, according to a new survey.
The latest Stifel/Eaton Partners GP Advisory Survey, which questioned 64 global investors regarding their approach to investing in GP-led secondary transactions, found that 68% expressed a preference for multi-asset structures, rather than single-asset transactions (32%).
Overall, 62% are increasing their allocation to GP-led secondaries as the end of 2022 approaches. Some 42% of investors are now allocating at least half of their invested capital in current funds to GP-led transactions.
Investors ranked Technology, Healthcare, Services, and Industrials as their current top industries of focus. Life Sciences and Energy ranked the lowest, essentially unchanged from the last survey in May 2022.
Opportunities extend across the globe, with respondents reporting that the United States, Europe, and Asia are of most interest, again replicating sentiment from the May survey.
More than half (55%) say they invested in excess of $100 million in in GP-led secondary transactions H1 2022, and 11% more than $500 million in the same period. This compares with only 36% of investors who expected to put in excess of $100 million to work in GP-led secondaries in the first half of this year, and only 7% who were planning to invest more than $500 million over that period.
In terms of a dedicated versus general pool of capital, investor sentiment remained virtually the same with roughly one-quarter (24%) using the former in H2 versus 26% in H1.
Once again, investors identified aggressive NAVs, mediocre investment opportunities, and unknown GPs as top issues when underwriting GP-led secondary recap transactions. In fact, over 90% of respondents believe it will take another quarter, or two, for NAV marks to adequately capture the downdraft in public equity and transaction comparables. Additionally in H2 2022, investors identified inflation/recession resilience as another top concern.
LP support and industry headwinds were of the least concern to respondents in both H1 and H2.
One-in-three respondents are now investing a majority of their fund’s capital in secondary LP portfolio transactions, with nearly 65% targeting smaller bite sizes of $100 million or less. Just under one-third (32%) meanwhile are planning to increase their deployment to such deals in 2022 compared to 2021, which perhaps points to anticipation of a potential balanced buyers/sellers market in H2 2022.
Key Takeaway – GPs | Investors remain focused on, and intend to increase their allocations to, GP-led secondary transactions with deals in the technology, healthcare, services, and industrial sectors of most interest
