An increasing number of general partners recognise the advantages of being proactive on behalf of their limited partners as regards the private equity secondaries market, according to Neil Campbell, global head of Tullett Prebon Alternative Investments, the secondaries investment team of the London-based broker.
In order for auctions to be truly successful, GPs have to be involved as initiators, Campbell said.
GPs taking the lead could also lead LPs to obtain better prices for their interests, he told Secondaries Investor.
“Pricing is far more aggressive and realistic than when it’s an ad hoc process, and without GP buy-in,” Campbell said. “Having the GP on board means that more information on the fund is available to potential buyers. This means that buyers are prepared to put in stronger bids.”
Campbell said that both older vintage private equity funds and newer non-problematic funds can benefit from regular liquidity events.
“Restructuring around older vintages makes perfect sense,” said Campbell. “But these auctions shouldn’t be just for funds that are older or restructuring. It could be something that a fund that does not have issues does every two years. It gives its LPs a chance to get liquidity. And the more liquidity windows they have for their assets, the more likely LPs are to invest.”
Tullett Prebon recently facilitated the auction process that led Partners Group to acquire $120 million-worth of LP stakes in the Trophy Property Development Fund, a Chinese real estate fund managed by Venator Real Estate Capital Partners. Venator had initiated the auction process.