RCP eyes smaller LP positions

Chicago-based RCP Advisors‘ average deal size has decreased this year, according to managing principal Jon Madorsky. The firm has historically invested in secondaries deals between $3 million and $30 million, with a median size of around $10 million.

Average deal size has decreased to allow the firm the maintain return expectations, Madorsky explained. Larger limited parter positions are more competitive, while the availability of small market positions of scale has shrunk.

“The secondaries market is more competitive for us to play in today,” he said.

RCP is investing its sophomore secondaries fund, which closed on $425 million in 2013. RCP Secondary Opportunity Fund II surpassed its $300 million target and received a commitment from the Clemson University Foundation, according to PEI’s Research and Analytics division.

The firm targets investments in small mid-market buyout funds managed by high-quality general partners. About half of the fund managers in RCP’s secondaries portfolio are GPs the firm has also invested with using its primary fund of funds or co-investment funds.

“Having fund of funds and co-investment products enables us to develop prospective relationships with these GPs,” Madorsky said.

However, this year Madorsky hasn’t seen as many high quality positions traded, so the firm’s deal sourcing efforts have to be “very vibrant and very active.”