In this episode of PEI’s Spotlight podcast, Jeff Hammer, global co-head of secondaries at Manulife Investment Management, sits down with senior editor Adam Le to debunk five controversial statements about the secondaries market. In order of discussion, they are:
- Continuation funds create a moral hazard for GPs because they’re dis-incentivised from maximising value for original LPs.
- The continuation fund market takes directs/co-investment dealflow away from institutional investors such as pension funds and sovereign wealth funds.
- The biggest conflict in GP-led secondaries processes is the fact that the sponsor wants to maximise value for LPs without maximising too much value, as it wants to leave enough room for the asset to grow post-transaction.
- Stapled deals are not the best use of secondaries buyside capital and are simply sweeteners to help get a secondaries deal over the line.
- The biggest barrier to growth of the secondaries market isn’t a lack of capital, it’s a lack of human resources and people with secondaries expertise.