ILPA eyes single-asset secondaries market for next guidance

The moves come three years after the LP representative body issued its initial guidance on GP-led fund restructurings.

The private equity industry’s most influential investor body wants to help limited partners better understand and deal with processes around the secondaries market’s fastest-growing segment.

The Washington, DC-headquartered Institutional Limited Partners Association is in the early stages of working on guidance around single-asset GP-led deals, a spokesperson for the organisation confirmed to Secondaries Investor.

It is understood ILPA is consulting member firms about the upcoming guidance.

The focus on single-asset GP-leds comes amid an increase in activity for the sub-strategy. Such deals accounted for almost 40 percent of manager-initiated secondaries processes last year, according to data from Greenhill. According to Lazard estimates, continuation fund deals centred on one asset accounted for 52 percent of sponsor-led deals by volume last year, compared with 38 percent in 2020.

The GP-led area in general has attracted the attention of financial regulators. The US Securities and Exchange Commission is proposing enhanced disclosure rules that would force private equity managers to report more information specific to areas including GP-led secondaries deals.

The rules, which would be required as part of an enhanced Form PF, would be a drastic enhancement of the kind of information private equity managers have traditionally disclosed. Regulators believe more information is necessary to properly understand private equity operations.

The proposal comes as the SEC under chairman Gary Gensler puts private equity under tighter scrutiny, with the intention of squeezing more information out of managers who have historically operated without much transparency.

The SEC’s proposals are in a public comment phase before they receive final approval.

ILPA supports the mandated use of the Form PF, which was required by the Dodd-Frank financial reform act in 2010 as a way to track systemic risk in private funds. SEC-registered investment advisers are required to file the Form PF each quarter or on an annual basis.

The LP representative body already has existing guidance on GP-led restructuring processes. In November, it published an update to its Due Diligence Questionnaire which includes guidance on GP-led secondaries and continuation funds. The body published its specific GP-led secondary fund restructuring guidance in 2019.

– Chris Witkowsky and Rod James contributed to this report.