Macroeconomic uncertainty and political risk can make for a buoyant secondaries market, with nervous investors selling certain assets and spurring dealflow, according to HarbourVest Partners managing director David Atterbury.
“Political risk manifests in a variety of ways in the secondaries market,” Atterbury said, speaking at a roundtable held by the firm in London on Wednesday. Where a US investor may be nervous about Europe, they may decide to sell some of their European assets, he said.
“In essence we think uncertainty is good from a secondaries dealflow perspective.”
In September, the Boston-headquartered investment firm launched an unsolicited takeover bid for SVG Capital, a London-listed private equity investor. While the firm did factor Brexit into its offer, the EU referendum was not a driver behind HarbourVest’s decision on when to launch the bid, executives from the firm previously told Secondaries Investor.
HarbourVest had expected dealflow from financial institutions to rebound after a “temporary softening”. It is now unclear how much private equity assets banks will be able to hold in the long-term under the new US administration, Atterbury said.
Atterbury also commented on the shifting investment patterns in the secondaries market, and how this has contributed to increased opportunities for asset managers.
“People used to only sell their investments if they needed cash. For example, if they were in trouble at the bottom of the cycle. That drove some boom and bust in the volume of opportunities in the secondary market, going back 10-15 years ago,” he said.
“Nowadays, investors in the asset class sell their interests for a number of reasons, which has been made possible by PE markets becoming much more liquid. Investors into the asset class now have access to a ready secondar[ies] market if they need to sell.”