Formed by Daniel Benin and Barthélémy de Beaupuy in 2010, the fund has already allocated about 20 percent of committed capital across 10 deals in the mid-market via LP sales and GP-led deals. Benin spoke to Secondaries Investor.
Congratulations on the final close. How much of the fundraising was done with covid-19 restrictions in place?
We raised approximately one third [€500 million] during covid. It might sound a bit weird, but we saw a certain level of acceleration. There was a little bit of a pause at the end of Q1, in May it started to accelerate and we were basically done by mid-July.
The indications of interest were subject to the investment committees. That’s where we experienced a bit of a delay, in actually processing all the documentation, with LPs and their advisors working remotely. We were very pleasantly surprised when a number of investors showed up and very rapidly, even without a meeting, decided to commit.
We have probably one third new investors with the rest coming from re-ups from existing investors, for the most part in larger amounts.
What were the common questions from LPs?
You could draw a line between pre-covid and post-covid. Pre-covid: “Is secondaries still a hot market? Are the prospective returns still there as the volumes raised have grown?” Then post-crisis it was: “How do you see the market picking up and in what type of deals?”
Did some investors view you as a distressed opportunity?
I wouldn’t say distressed; counter-cyclical is probably more appropriate. We saw a number of LPs that were not considering putting money to work in secondaries this year who committed very rapidly between May and July. Clearly, they put on hold re-ups in other segments – buyout, venture, growth or even debt – in favour of distressed, restructuring and secondaries.
How big an opportunity are GP-led deals at the moment?
You will see a number of tail-end funds and GPs that need to consider alternative divestment processes as a result of the longer holding periods. That’s usually what happens when you have stress in the market: 12 to 24 months of additional holding period to fix whatever needs to be fixed. Our expectation, even before covid, was that GP-leds and restructurings were going to increase because you already had $600 billion or $700 billion of assets trapped in pre-2010 vintages.
The years 2012-19 have been record years for private equity fundraising. The next five to 10 years are going to be a massive source of dealflow on the LP stakes side but also GP-led opportunities, if GPs have not been able to divest 100 percent of their portfolio during this time.
Do you go in the syndicate on big GP-led processes?
We would rather lead but if there is a very good-quality opportunity and it’s too large for us, paying attention to concentration risk, we would be ready to join a syndicate. With the vast majority of what we have done so far, we have led on the deals.
Do you invest in preferred equity deals?
When we are talking about fairly risky assets or concentrated portfolios and it’s important to have some downside protection, we are able to. It should not be at the detriment of overall performance. If you are capped at 1.3x … most of our LPs are willing to take a bit of risk to get more than 1.3x or 1.4x net.
What are your predictions for 2021?
To some extent we think the worst is behind us, at least from a human standpoint. From an economic standpoint, we are going to see a number of sectors that were impacted start to gradually recover, some in 2021 but for the most part in 2022 and onwards.
It will be interesting to see how things resurface. A number of companies have been able to navigate 2020, but now it’s a question of how the new orderbook is going to compare to the previous one. This is sector by sector but even company by company. It’s going to take caution, discipline with respect to capital deployment, and an increased level of due diligence will need to be performed in getting deals done. We have to deal with uncertainties that were not necessarily present before.
There will be opportunities, not only for secondaries but on the direct side as well. You have new consumption habits, new ways of doing things, travelling, consuming, thinking … In secondaries, we have the luxury of being able to look at things afterwards and can anticipate trends based on the past.
Daniel Benin is a founder and managing partner of Committed Advisors. Prior to forming the firm in 2010, he worked at AXA Private Equity as a managing director and co-head of its New York office.