Neuberger sees little attraction in staples

Neuberger Berman hasn’t seen a lot of attractive stapled deals this year, in part because a lot of the opportunities come from low-quality fund managers, explained head of NB Alternatives Anthony Tutrone.

“In general the better primary funds don’t need to do stapled secondaries to raise their funds and we won’t invest in a weaker fund just to get a secondary deal done.”

Tutrone said a lot of the GPs that offer stapled secondaries have had weak performance and are struggling in the fundraising market. Those GPs are often the ones to restrict who their limited partners may sell their positions to.

“After the financial crisis some LPs were forced to sell for capital or cash issues. These LPs were frustrated when GPs refused legitimate offers from high quality secondaries buyers and forced them to find buyers that would commit to primary funds via staples.”

As a result, many GPs heard LPs’ objections and reasoned this strategy was not in the best interest of their investors, Tutrone added.

“The more high quality GPs would rather do the right thing for the LP, not constrain them.”

Neuberger Berman has historically completed a few stapled transactions using its large separate accounts with single investors. The firm’s fund of funds that have primary and secondaries investing strategies have also completed some staples, but its dedicated secondaries vehicles don’t have the capability to invest on a primary-basis.

“We certainly have done some staples but it’s a very small part of what we do,” Tutrone said.