Non-secondaries focused fund of funds allocate an estimated 20 percent of their capital to secondaries, according to online private equity marketplace Palico.
“The allocation has increased since the global financial crisis and is more than double what it was a decade ago,” a spokesperson said. He added an allocation of this size is the norm for large, global funds of funds and he doesn’t expect it to increase further.
Palico surveyed 150 non-secondaries focused fund of funds and found vehicles had a secondaries allocation because it is more efficient and helps to diversify fund portfolios. Investors are also fond of secondaries allocations, the spokesperson explained.
“Limited partners like the allocation as long as a fund manager can argue they have the credible expertise to invest in secondaries.”