Private wealth’s one-stop shop for secondaries

Secondaries players are stepping up efforts to launch evergreen vehicles granting high-net-worth investors exclusive access to the sub-asset class.

Both Pantheon’s AMG Pantheon Credit Solutions Fund and Coller Capital’s Coller Secondaries Private Equity Opportunities Fund have been given the regulatory green light by the US Securities and Exchange Commission in recent months.

While some evergreen vehicles already boasted a heavy weighting to secondaries, the launch of vehicles dedicated to secondaries alone could pique the interest of market participants concerned over the secondaries industry’s lack of capital relative to demand.

There are myriad reasons why asset managers believe secondaries investments are suitable for the needs of evergreen investors.

Rick Jain, global head of private credit at Pantheon, tells Secondaries Investor that the firm’s private credit unit, which manages close to $7 billion, has historically raised capital from number of high-net-worth investors, family offices and retail investors for its over 20 commingled funds and SMAs, spanning different investment strategies and return profiles. The firm decided last year that a credit secondaries product would be “readily accepted and very attractive” for that particular channel.

“What’s happened in the last couple of years, and we’re hearing it every day, is secondaries is front and centre,” Pantheon’s head of US private wealth, Mike Hutten, adds. “[There is a] lack of liquidity available in the market. First, it was the denominator impact; second… M&A activity is down so much – so this idea that you can come in and you can build really superior portfolios in private investments using secondaries is pervasive. It’s all over the place, so it’s not a secret anymore.”

There is, however, a barrier to entry. Considerable infrastructure and support is required to execute these vehicles, which could put smaller secondaries shops at a disadvantage.

There is also concern in the market around investment choices made for these vehicles. Speaking at a media roundtable this week, Juan Delgado-Moreira, co-CEO of Hamilton Lane, noted that primarily chasing big discounts for an evergreen strategy could prove detrimental. Focusing on quality first should be the name of the game.

Filling an evergreen fund with secondaries without having the necessary experience could have knock on reputational implications for other vehicles.

Pantheon’s Hutten, however, is under no illusion that its secondaries-focused product will be an outlier. “We’re probably about a year or two ahead of our time… others will come eventually,” he says. “It’s just a great way to buy private credit; a great way to provide downside protection, and then also have upside opportunity. Very rarely do you get the combination of those two different factors.”

Provided any future evergreen products are constructed in a careful manner, they could prove a welcome boost for an industry starved of secondaries capital.