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LPs use secondaries to rebalance portfolios

Liquidity needs aren't motivating today's secondaries market sellers, investors told Coller Capital.

Roughly 42 percent of LPs polled recently by Coller Capital said they planned to sell assets in the secondaries market over the next two years. The firm’s winter 2013/14 ‘Global Private Equity Barometer’ captured the views of 113 private equity investors from around the globe.

When asked why they’re selling in the secondaries market, nearly 70 percent of respondents said that they planned to refocus their capital on their best-performing GPs. Of the would-be sellers, the study noted that 96 percent were from North America, compared with less than a third of LPs from Europe.

Source: Coller Capital

“Many of the investors we meet are over-exposed to the pre-crisis vintages, and they are hearing repeatedly from intermediaries that it is the right time to sell. The dealflow is definitely very robust,” Francois Aguerre, a partner at Coller Capital, said in an email.

Some 40 percent of respondents said they were selling to redirect their resources to other asset classes or uses, while just under 10 percent said that they wanted to sell in order to increase liquidity.

Aguerre said one of the main reasons why LPs see the secondaries market as an important tool for rebalancing their portfolios is that it can take “several years” not just to shape a portfolio but to run due diligence and commit to funds. Not mention that the commitment turns to NAV. “The secondaries market allows you to move blocks of NAV, in or out, in a very short period of time,” he said.