How BlackRock uses the secondaries market

BlackRock, the world’s largest asset manager, has been busy selling stakes on the secondaries market, most recently tail-end positions in European buyout funds to Hollyport Capital.

At PEI’s Global Investor Forum in Tokyo last week, Johnathan Seeg, a managing director in BlackRock’s Private Equity Partners group, told attendees the firm uses the secondaries market opportunistically and that high pricing has been driving it to sell stakes.

“Like any market, in the secondary market we believe there are times to be a buyer and there are actually times to be a seller,” Seeg said. “We will actually go both ways on that and in the last two years we’ve been liquidating a number of our holdings, we’ve been selling into the secondary market.”

“We’ll make that judgement call based on where we’re seeing pricing, and like other parts of the market it has been a full-priced market,” he said.

This is in contrast to firms such as Ardian, which has said it prefers to hold on to stakes it has acquired in order to receive returns from the portfolio.

While complex transactions such as restructurings, staple deals and the use of debt are on the rise, BlackRock prefers to use the secondaries market as a portfolio management tool, and when acting as a buyer it generally purchases single stakes as opposed to multiple portfolios, Seeg said.

“Leverage has crept in, structuring has crept in, and every secondary [deal] is not the same,” he said. “You have to be aware of what the underwriting is, you have to be aware of what you’re actually buying.”