HQ’s Munafo: deployment pressure is less acute at lower end

Record high levels of dry powder in the secondaries market means large secondaries firms are experiencing deployment pressure, but this is not so for HQ Capital, according to a managing director who oversees the firm’s secondaries programme.

“Our objective is to create right-sized funds that leverage our global platform and strategy to uncover deep value opportunities throughout all market cycles,” Christian Munafo told Secondaries Investor. “We want to avoid sitting on too much dry powder, which can result in deployment pressure and chasing deals with less attractive return profiles.”

Munafo joined Auda from Thomas Weisel Partners last August when Auda acquired three secondaries funds from the San Francisco-based asset manager. In September, Auda joined HQ Group’s real estate and buyout businesses to form HQ Capital under the one brand.

HQ Capital is close to fully deploying its $332 million Auda Secondary Fund III, and the firm’s secondaries strategy focuses on deals under $20 million, Munafo said. He declined to comment on the firm’s current fundraising activities.

The firm is currently in market with Auda Secondary Fund IV targeting $400 million and Auda Asia Secondary Fund targeting $200 million, according to PEI’s Research and Analytics.

With the integration of Auda and HQ’s different businesses last September, the firm is also “seriously thinking” about real estate secondaries, Munafo said.

“Given the recent integration within HQ Capital, you will now have secondaries investment professionals and real estate investment professionals sitting together, so it is likely we will explore whether or not it makes sense to create a secondaries solution for the real estate market,” Munafo said.

Recent public market volatility has made traditional LP secondaries more attractive due to heightened fear and uncertainty from LPs, leading to a decline in secondaries assets pricing, he said.

HQ Capital has over $12 billion in assets under management and operates out of nine cities across the US, Europe and Asia, according to its website.