Traditional limited partners have been increasing their activity as secondaries buyers, with pensions alone accounting for almost 5 percent of purchases in the first half of this year, according to Setter Capital.
One of those LPs is Sweden’s AP7, one of the country’s largest pensions and sole defined contribution fund. The €48 billion pension is hungry for private equity and has been building out its portfolio through acquisitions on the secondaries market.
“I do think it’s a very good thing that the secondary market has evolved in such a way,” Per Olofsson, AP7’s head of alternatives, told sister publication Private Equity International. He referred to the rapid increase in annual deal volume, estimated at around $58 billion last year, according to advisor Greenhill Cogent.
“If for some reason you want to re-allocate within your portfolio it’s much easier to do,” Olofsson added.
AP7 has sold small limited partnership positions but has been more active on the buyside, Olofsson said. One programme the pension acquired in late 2014 at around a 24 percent discount to net asset value has almost doubled in value.
“You really have to find the inflection point,” he said. “I would rather buy a programme that is just about to become cashflow positive within the next 12 to 24 months because that’s where you can pick up good value.”
While building an in-house secondaries team isn’t a priority, the pension remains willing to make opportunistic purchases of LP stakes, Olofsson said.
You can read the full interview with Olofsson on sister publication Private Equity International as part of its Privately Speaking series next month.