ICG‘s chief executive and chief investment officer has said that the environment of private equity sponsors wanting to hold onto assets for longer has been a boon to its Strategic Equity strategy.
Speaking on the firm’s full-year earnings presentation in May, Benoît Durteste said that in the current environment where there is uncertainty around valuations, appetite for sponsor-initiated continuation fund deals is “huge”.
“The amount of dealflow is immense – origination is not an issue. The question is choosing your fights and where are you going to best invest the capital,” Durteste said. “As a result, we finished raising [Strategic Equity] Fund IV last year. We’re already done – it’s all invested. So, we’re looking for more capital to keep on investing. This is really a strategy where we’re optimising – we never thought we’d be back in the market so quickly.”
ICG’s Strategic Equity team closed its ICG Strategic Equity IV vehicle on $5.3 billion last year, Secondaries Investor reported at the time. The vehicle remains the largest dedicated pool of capital to GP-led secondaries.
The firm is understood to have launched Fund V in November with a $6 billion target.
Durteste acknowledged that returning to market with a subsequent flagship could be a challenge. “Coming back so quickly on the back of the previous fund creates some difficulties because LPs have just given us money.”
ICG operates at least two secondaries strategies. Its Strategic Equity team, led globally by Ricardo Lombardi, focuses on single-asset GP-led transactions. The LP secondaries team is led by Oliver Gardey – who was previously head of Europe at Pomona Capital before moving to ICG in 2019 – Ryan Levitt and Vivien Blossier. The latter team is raising an LP portfolio-focused fund, ICG LP Secondaries Fund I, which launched in 2020.
During the presentation, Durteste said some LPs wanted managers to split out their GP-led and traditional LP secondaries strategies.
“Most of the large LP secondaries players have started doing a bit of both in the same funds, as GP-led transactions are boosting overall returns, but they’re actually very different activities,” he said, adding that GP-leds are more of a private equity activity, while LP portfolio trades are more volume-driven.
“A number of LPs are not particularly enthused by this; they think you’re mixing and matching two very different asset classes. To come to these LPs and say we can recreate a pure LP secondary product, which is what you want – there’s actually appeal for that.”