A shorter duration complement to an overall private markets portfolio
The secondary market has been an attractive place for investors to deploy capital as demonstrated by the growth in both transactions and fundraising. As this market has become increasingly mature and sophisticated, transaction structures have grown more complex. We believe today’s market conditions, characterized by the global growth of private markets and more active management of private market allocations, lend themselves to the strengths of our differentiated approach. With 24+ years of experience in this market, we remain focused on finding value in more complex and innovative secondary opportunities.
Our goal is to provide investors with significant capital appreciation by delivering attractive risk-adjusted returns. Through our unique approach and competitive positioning, we have implemented this strategy by focusing on:
- Quality, mature assets
- Partnering with quality general partners
- Flexibility and expertise across the spectrum of secondary investments
- J-curve mitigation and cash yield
Deal Spotlights
Project Atlantico
Who they are
An LP portfolio consisting of 17 fund interests that hold 300+ companies.
Why it matters
The portfolio is broadly diversified across high-quality GPs with which we have had long-standing relationships. We have previously invested alongside 100% of the GPs in the portfolio.
The HL advantage
We had full access to all GPs, having dedicated calls with each one, positioning the firm favorably in a process whereby some GPs prohibited the seller from disclosing some, if not all, information on their funds his competitive advantage allowed us to swiftly determine the most attractive combination of fund interests in the portfolio. As a result, we were able to preempt a broader competitive process as well as negotiate a 50% purchase price deferral, positively impacting returns.The bottom line
The combination of high-quality GPs, an attractive split of fund vintages, underlying diversification, a strong purchase price deferral and our information advantage made this a highly compelling transaction.
Project Bull
Description
A GP-led transaction involving a tender offer for interests in the GP's two prior vintages as well as a late primary commitment to the GP's newest fund.
Why it matters
The portfolio consists of 24 North American mid-market companies across diverse sectors including Business Services, Industrials and Consumer. Valuations are broadly in-line with or below comparable companies, and operational performance is trending above prior years for much of the portfolio. The seed portfolio for the late primary has already seen early mark-ups while the two older vintages have potential for near-term liquidity, providing a balance of potential value appreciation and liquidity.
The HL advantage
Our familiarity with the GP gave us strong conviction in the GP’s ability to drive growth and exit similar businesses across market cycles. We stood out in the restricted process due to our platform’s prior investments in the GP’s funds, our reputation as a value-added limited partner, and our flexibility to offer LPs several options, including deferred payment in exchange for a reduced purchase discount.
Project Somerset
Description
An acquisition of a portfolio featuring four fund interests across two reputable general partners.
Why it matters
The selling LP, facing liquidity challenges, approached us due to our 10+ year relationship. We were then provided with a unique opportunity to access a direct, proprietary transaction. The deal showcases our ability to successfully navigate liquidity challenges and seize a favorable position in the market.
The HL advantage
The deal stems from our long-standing relationship with the seller and prior investment in a significant asset within the portfolio. This familiarity allowed us to confidently navigate the complexities of the deal, leverage existing underwriting for conviction in entry valuation and future performance expectations, and ultimately secure an attractive price in a proprietary transaction.
The secondary market has seen exponential growth over the last several years. With our experience, scale and network, we believe we’re well positioned to deliver attractive risk-adjusted returns to our clients.
Head of Secondary Investments, Co-Head of Investments
Utilizing our market-leading data to gain a greater level of insight
Our proprietary technology combined with our database of over 22,670 funds and 163,870 private companies provides a unique advantage to better understand the drivers of value within a deal. Our data advantage and extensive global primary platform represent a crucial competitive advantage and drive our ability to be a conviction buyer. We use our market-leading data to gain a greater level of insight, which is essential when the objective is to limit the downside and generate strong risk-adjusted returns.
As of 9/30/2024