How Sweden’s Skandia views GP-led secondaries

Like many investors in today’s fundraising environment, Skandia Asset Management is no stranger to GP-led secondaries opportunities.

In such processes, a GP typically moves an asset, or multiple assets, out of an existing fund and into a continuation vehicle, giving LPs in the original fund the option to sell or roll their exposure.

The market for continuation funds was worth $63 billion last year, according to research by Lazard, and some expect the total secondaries market to be worth $2 trillion by 2030.

For its part, Skandia is sceptical of continuation fund transactions, according to Daniel Winther, head of private equity and infrastructure at the roughly SKr600 billion ($59.4 billion; €56.3 billion) Swedish insurer.

“For me, that translates into there’s a big chunk of money left on the table for LPs that they hand over to someone else. We don’t want to support that phenomenon,” Winther told affiliate title Private Equity International. The insurer’s secondaries exposure via commitments to secondaries managers include Ardian‘s ASF VIII vehicle, according to Secondaries Investor data.

Skandia would be supportive of processes that involve well-performing managers who have a valid reason for wanting to conduct such transactions, provided there is a good roll alternative, a good sell alternative and the price is seen as fair.

“If it’s properly done so that it really is about riding that winner [for] four or five more years, then I’m in favour of that,” he said. “[But] we’ve seen situations where the price is obviously not fair, where they could have sold an asset for a higher price, but they decided to roll into a continuation fund at a lower price,” he said, adding that Skandia has mostly sold in continuation fund processes.

“For us, we’re always trying to understand to what degree they take their fiduciary responsibility seriously and their degree of ethics and ethical compass internally. If they do something like that, what does that tell you about the GP in a wider perspective?”

– This is an excerpt from a full interview with Skandia Asset Management that appears in the June issue of affiliate title Private Equity International.