Partners Group’s Layton: GP-leds coming back at lower valuations

The firm has seen several examples of transactions that it previously passed on being relaunched with refreshed pricing.

Sponsors who have unsuccessfully tried to tap the secondaries market with GP-led deals are reattempting to run those same processes at lower valuations amid the drop in public market values, according to Partners Group‘s chief executive.

“We’ve had several examples of transactions that we’ve passed on – I guess other people passed on as well – [and] we’re starting to see those come back at lower valuations,” David Layton said on the firm’s H1 2022 AUM presentation on Thursday.

There are signs that GP-led volume for the first half of this year has been muted. Several market sources have told Secondaries Investor that buyside participants do not have as much capital to deploy as they had in 2020 and 2021, and that advisers are telling GP clients to hold off on launching deals.

Sponsor-initiated processes accounted for half of the $126 billion of total secondaries market deal volume last year, according to data from Lazard. This was more than double the prior year’s share, when there was $30 billion in GP-led transactions.

Responding to a question about the California Public Employees’ Retirement System‘s recent sale of around $6 billion in private equity stakes, Layton said he expected to see more traditional LP portfolio sales.

“I do think we will see a resurgence in traditional secondaries as people look to balance out the public and private elements of their portfolio following the most recent correction,” Layton said. “I think the CalPERS move could be one in that direction, but there’s others we are having conversations with. But you are yet to see a lot of that transaction volume come through.”

The denominator effect has not led to many LP portfolio sales, he added. “A lot of people talk about the denominator effect and how that impacts the secondaries market. We’ve been hearing a lot of talk about that, but not a lot of transaction activity. I do expect a resurgence in traditional secondaries activity.”

The firm expects its own private equity positions’ net performance to come down by mid-single digits as of June, Layton said.

Layton is stepping aside as head of Partners Group’s private equity business, focusing solely on the chief executive position, the firm said last week. Wolf-Henning Scheider is set to join the firm as partner and head of private equity early next year at the conclusion of his current contract. Scheider is chief executive and chairman of the board of management at ZF Group, which manufactures systems for passenger cars, commercial vehicles and industrial technology.