Kline Hill: Q2 was our largest ever

Sellers pushed on with secondaries sales despite the crisis and dealflow is likely to remain strong into December, according to Jared Barlow, a partner at the firm.

Not all secondaries buyers saw dealflow collapse in the second quarter, according to a partner with Kline Hill Partners.

Speaking to Secondaries Investor, Jared Barlow said the niche secondaries specialist has transacted on a “couple of dozen transactions” since the beginning of March, with the second quarter being its “largest ever” for investments. It transacted on 10 deals sourced in March, during the initial shock of the pandemic.

“It felt like almost every deal in the second quarter was because of covid or a seller that was already in the market and despite covid, still wanted to move forward, albeit at lower pricing,” he said.

While the recovery of public markets caused the number of distressed opportunities to reduce by mid-summer, there are still “pockets of higher motivation”, especially among family offices, Barlow added. The desire to close deals done before the end of the year suggests the smaller end of the market may remain busy well into December.

Kline Hill was targeting a combined hard-cap of $600 million for its latest secondaries programme, Secondaries Investor reported in March. This is split between flagship vehicle Kline Hill Partners Fund III and Kline Hill Partners Opportunity Fund III, an overflow vehicle to help it invest in larger deals.

Most of Kline Hill’s activity has been acquiring LP stakes in growth and buyout funds. The need at the smaller end of the market to “custom-craft” GP-led deals has also presented opportunities at a healthy discount.

“[Small] GP-leds often don’t lend themselves to a broadly competitive processes. In older funds – 12, 15 [years old] or sometimes even older – LPs are often down to a fraction of the asset value of what their commitment used to be. It can be that triple win for the GP, the secondary buyer and the seller,” Barlow said.

Kline Hill was founded in 2015 by managing partner Mike Bego, a former partner with Willowridge Partners. He was joined in the same year by Barlow, formerly of Sweetwater Capital.

The firm has $1 billion in assets under management, according to Secondaries Investor data.