A number of asset managers have swooped in to buy secondaries firms to get a foot in the expanding market in recent years, but Patria Investments has taken an unorthodox approach to gaining exposure.
The Brazilian investment firm is set to acquire Scotland-headquartered investment manager Abrdn’s European private equity business, which has $9 billion of AUM, it was announced this week.
Its secondaries unit, which makes up around 25 percent of the business’s NAV, was front of mind for Patria – it was the first point Patria managing partner Marco D’Ippolito brought up in an interview with affiliate title Private Equity International.
The firm began looking closely at the secondaries market as well as the co-investment and primaries markets five or six years ago, D’Ippolito said. The firm acquired Chile-headquartered Moneda Asset Management in 2021, which fuelled its ambitions to acquire a global private markets player.
The reason why it decided to acquire Abrdn’s private equity business is because of its mid-market focus. “I believe that the mid-market is the most interesting piece in [secondaries]. I believe that you can build portfolios that are uncorrelated, and you can generate alpha versus the secondary benchmark,” D’Ippolito said.
Patria has offered secondaries to its investors alongside funds of funds and co-investments via feeder vehicles to global alternatives managers, we understand. When Secondaries Investor reported on Patria’s designs to formalise and widen its secondaries business in September, sources said the business would initially focus mainly on traditional LP secondaries.
But Abrdn’s primary business, which has over 150 GP investment relationships currently and more than 250 fund advisory board seats, opens the door for further secondaries opportunities. “When you have an integrated model, your ability to generate GP-led opportunities and co-investments opportunities plays out very well. We believe that this model is a winning model,” D’Ippolito said.
Secondaries will make up 21 percent of the newly formed Patria Global Market Solutions’ $9 billion-plus of fee-earning AUM, according to a presentation.
Market participants have mulled over the fact there are fewer opportunities for larger players to buy independent secondaries firms outright following acquisitions by the likes of CVC Capital Partners, Ares Management and Franklin Templeton, to name a few. Those building their teams out organically also run into the same issue – the war for talent is well documented.
Managers with designs to move into secondaries will watch Patria closely following the close of the transaction. If Patria is able to create a burgeoning secondaries business with an acquisition of a unit that primarily dedicates its resources to primaries, expect more to asset managers to follow suit.
– Carmela Mendoza contributed to this story