In February, Madrid-headquartered Altamar Capital Partners raised €541 million for Altamar Global Secondaries IX, beating its €500 million target and attracting non-Spanish European LPs for the first time.
Secondaries Investor recently caught up with managing partner Miguel Zurita about the changing makeup of the fund’s LP base and its plans for navigating potential deployment headwinds.
How was this fundraise different from previous ones?
We had a more consolidated track record. Historically, we were investing in secondaries out of our main fund and a couple of sidecar vehicles. This time there was a shift from a pure opportunistic secondaries strategy to a core strategy.
Two things happened. Our organisation had grown; we could show a strong track record and had opened an office in New York, so we could complement the European private equity team with other asset classes. We were ready to cope with growing dealflow. The other thing is that we really believe the market has changed. The secondaries market is no longer just a place where distressed sellers seek liquidity. The size of the market, maybe with some bumps in the road, is only going up.
Do your investors see secondaries primarily as a J-curve mitigator or a generator of returns?
Typically we saw secondaries as something that will smooth the J-curve – higher IRRs and maybe lower multiples in capital invested. That’s why we already do some secondaries in our primary funds and it’s worked very well.
But it’s also a way to put money to work faster. In the primary market, it’s hard to reach allocations and put money to work in today’s environment. And funds are using leverage, so it takes even longer. The last motivation is that it’s a shorter cycle. There are investors, such as family offices, whose primary cycle is a little bit too long and secondaries allow them to have exposure to private equity with a shorter cycle.
Do family offices make up a large proportion of your LP base?
Around 40 percent of our investor base is high-net-worth individuals and family offices and these come primarily from Spain, though not exclusively. The rest is institutions, mainly pension funds and insurance companies. I’d say about one third come from outside of Spain. Historically, that was all Latin America. In this secondaries fund, for the first time, we had some non-Spanish European investors.
Do GP-led deals make up a majority of your investments?
Definitely – maybe not a majority but a significant part, for sure. Our strategy is more niche. We focus on situations with a high level of complexity, where price is not the only dimension, and a GP-led is a typical example of that. You have to agree on a price, you have to talk about additional capital that might enhance the portfolio, sometimes you’re talking about resetting terms… Those are situations where we feel comfortable.
With prices where they are, do you feel you have to manage expectations around deployment?
There’s obviously pressure because there’s plenty of money everywhere and secondaries is not an exception. Our reaction to this is in two ways. One is to be more focused on dealflow generation, which allows you to continue to be selective; towards the end of November last year, we had already looked at twice the number of deals that we had in the previous year. The other is to pay particular attention to those complex situations where pricing is not the only issue. You are not going to get bargains – you have to pay the right price – but you don’t have to compete on the basis of who’s going to suffer more by putting the extra dollar on the table.
Are a majority of your deals in the US, or in Europe?
We’ve already deployed more than $100 million of this fund, and of that, there’s more in the US than in Europe. We’ve had a New York office now for a couple of years. Being able to just cross the street and have a conversation with the GP or the lawyers helps. Historically we’ve had more European deals, but we expect that to be more balanced going forward.
You’ve moved into a number of different asset classes. Might we see your traditional fund of funds take a back seat?
Primaries are still a great investment opportunity. We’ll never abandon that. Secondaries we see as a nice complement. In all our asset classes, whether venture capital, infrastructure or real estate, we do secondaries. Given the dealflow and size of the market, it makes sense to have specific secondaries funds in private equity; maybe not yet in the other asset classes, but who knows? In the future, why not have specific pockets [in those asset classes] for secondaries or co-investments as we grow?
Miguel Zurita joined Altamar as co-CIO in 2013 and heads up the firm’s private equity operations. He has more than 25 years experience working across Spain and Latin America, including a stint as investment director of MexCapital, one of Mexico’s earliest private equity funds.