Half of family offices, foundations invest in secondaries

Less than a quarter of them have either sold or purchased fund interests on the secondaries market, according to a survey by PEI's Research and Analytics division and Montana Capital Partners.

More than half, or 52 percent, or family offices and foundations invest in secondaries funds, according to a recent survey conducted by PEI’s Research and Analytics division and secondaries firm Montana Capital Partners.

When it comes to engaging in secondaries transactions, participation drops. Some 20 percent of respondents said they have previously sold positions in the secondaries market and only 16 percent have purchased fund interests in the secondaries market.

Reasons for active portfolio management through the secondaries market are unchanged from last year’s survey, with attractive pricing being the most cited, by 26 percent of respondents. It was followed by the performance of a manager at 24 percent and long-term strategic reasons at 23 percent.

Generally speaking, the family offices and foundations who are active in secondaries transactions tend to prefer small secondaries at 26 percent, direct secondaries at 23 percent and single fund purchases and tail-end deals at 21 percent. However, none of those surveyed chose large fund portfolio acquisitions as a preferred secondaries strategy.

“In general, secondaries pricing are quite steep,” Denmark’s Realdania pointed out in the survey. “With [direct secondaries] it is harder to get the deal done, meaning there is more complication, and hence the scope for returns is higher.”

Please describe your relationship with secondaries:

Source: PEI, Montana Capital Partners

What would be your most likely reason for doing active portfolio management via secondaries?

Source: PEI, Montana Capital Partners