A new survey from Stifel Financial Corp (NYSE: SF) and Eaton Partners, a Stifel Company, suggests that institutional investors continue to have a strong appetite for GP-led secondary recap transactions across the globe, even in the face of increased market volatility, high inflation, and geopolitical instability.
The Stifel/Eaton Partners 2022 GP Advisory Survey questioned 97 global investors regarding their approach to investing in GP-led secondary transactions.
Investors ranked Technology, Healthcare, Industrials, and SaaS as their current top four industries of focus, while Life Sciences and Energy were ranked the lowest.
Opportunities are borderless, with respondents reporting a wide-ranging and balanced appetite across almost all geographies, with the United States, Europe, and Asia of most interest.
More than a third (36%) expect to put in excess of $100 million to work in GP-led secondaries in the first half of this year, including 7% that are planning investments of more than $500 million.
The target return profile underwritten by those surveyed is centered around a 15% gross IRR (34%) and a 20% gross IRR (46%), which highlights the compelling nature of the companies being targeted.
More than one-third surveyed said they preferred to invest either as a lead investor (30%) or as the sole investor (8%), while 62% preferred to invest as part of a syndicate.
Preferences for single-asset secondary opportunities (49%) versus multi-asset opportunities (51%) were evenly split. In addition, 26% said they had dedicated capital for GP-led secondary recap transactions, which we expect to increase in the near to mid-term, versus 74% that use a general pool of capital.
Respondents identified aggressive NAVs, mediocre investment opportunities, and unknown GPs as the top three issues they encounter when underwriting GP-led secondary recap transactions, while industry headwinds and limited partner (LP) support were ranked as issues that concerned them the least.
