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Alignment of Interest
In this episode of PEI Group’s new podcast miniseries, we analyse the key findings from Secondaries Investor’s inaugural Global Market Survey.
While the GP-led market is booming, perceptions differ when it comes to rationale, valuations and alignment.
Endowment sales ticked up in the first half of this year to around 15% of overall LP sales, according to Campbell Lutyens’ half-year volume report.
There is now proof of concept that institutional and retail products can successfully be managed side by side, say Davis Polk’s Andrew Ahern, Oran Ebel, Christopher Healey and Leor Landa.
When dealing with waterfalls, there are tools that can be used to create economic alignment from the outset.
An incentivised management team is crucial to ensuring ultimate success in GP-led secondaries deals.
Finding the pricing sweet spot to satisfy sponsors, buyers and LPs is tougher than ever in today’s market.
Conflicts of interest can arise within the LP base as LPACs act in their own interest, not in the interest of the fund.
For the GP, internal alignment is another opportunity to manage team dynamics. Third parties will want to see that the right people participate in the economics.
Some sponsors are still able to drive aggressive terms in GP-led deals, though perhaps not for much longer.