Blackstone raising fund to target GP-led secondaries deals

Blackstone is raising a pool of capital that will target GP-led deals like fund restructurings and single-asset deals.

The New York-headquartered giant joins TPG as the latest high-profile GPs to raise a separate fund for GP-led secondaries, which differ from the traditional private equity secondaries transaction involving a limited partner selling its stake in a private equity fund.

GP-led secondaries are on the rise as firms look for ways to hold certain assets beyond the rigid confines of traditional private equity funds. Evercore found in its recent secondaries market survey that GP-led deals represented 50 percent of 2020 deal volume.

Blackstone has had a secondaries group since 2013, when it acquired Strategic Partners from Credit Suisse. The firm has participated in GP-led deals through its global secondaries fund – the latest of which closed on more than $11 billion in 2019 – and the firm saw the opportunity to raise a separate pool of capital just for those types of deals.

It is unclear how dealflow would break down between the two pools. Blackstone expects to start raising its next global secondaries fund later this year, Jonathan Gray, Blackstone’s president and chief operating officer, said on the firm’s fourth quarter and full-year earnings call last week. Strategic Partners’ Fund VIII was more than 75 percent deployed, he added.

“If you believe in the alternatives mega-trend, secondaries is a powerful way to play it,” Gray said, adding that as more capital pours into the industry, the market naturally evolves means for liquidity. “Alternatives are growing at high single digits, low double digits across the globe.”

It is unclear how much the fund, which Gray said was in market, is targeting. The fund will be run by the overall Strategic Partners team, and one or more individuals are expected to lead the strategy.

Strategic Partners hired Nik Morandi last year to lead the group’s investment activities in Europe, the firm said. Morandi previously helped lead the European secondaries business for the Canada Pension Plan Investment Board.

TPG is out talking to limited partners about its first GP-led fund that could target as much as $2 billion, sister title Buyouts previously reported. TPG’s fledgling secondaries team is led by Michael Woolhouse, who previously led secondaries at CPPIB.

Evercore estimated uncalled capital levels for secondaries at around $113 billion as of December, an increase from $96 billion in December 2019. Fundraising for secondaries should be active this year, with $72 billion of planned capital raising in the next 12 months, according to Evercore’s 2021 secondaries market survey.

– This report was originally published on sister title Buyouts.