The buyout-firm-cum-secondaries-investor: friend or foe?

If you can’t buy the assets yourselves, why not buy into a transaction that allows your peers to hold those assets for longer?

That’s the mental arithmetic Astorg appears to have deployed when it decided to launch its continuation fund strategy, sources told Secondaries Investor last year. Our report this week that the firm has made external hires to bolster up the strategy and move investment team members internally shows it means business.

Astorg joins the likes of TPG and Audax Private Equity, which have launched continuation fund strategies within recognised buyout firms while also taking a more organic approach to building out teams.

Paris-headquartered Astorg has landed a key hire to join its team, crossing the first hurdle in the competitive landscape for talent. Sebastiaan Van Den Berg is set to join the firm to co-head the strategy alongside Astorg partner Michal Lange. Van Den Berg comes from Arch Capital where he was the insurer’s CIO for alternatives. He previously spent more than a decade with HarbourVest Partners.

The firm, which declined to comment to us about its recent appointments or strategy launch, has also hired Chuck Sandilya as a director from StepStone Group. Ben Deanfield, a managing director at Astorg, will move across to the secondaries team.

Advisers with whom Secondaries Investor spoke welcomed the news of a fresh buyer entering the market. The largest constraint to the secondaries market’s growth is often said to be the amount of money available to be deployed with opportunities aplenty.

It remains unclear exactly what Astorg’s strategy and approach will be. Still, the key could be finding an edge in a space where incumbents are currently overlooking or unable to transact on dealflow. ICG’s Strategic Equity group, for example, has solidified its position as one of the only firms that is able to underwrite sizeable transactions as the sole buyer. Morgan Stanley focuses on mid-market private equity, which is “not at any level the most competitive market – it’s favourable to buyers”, its head, Nash Waterman, told Secondaries Investor in February.

One thing that some incumbent buyers of concentrated continuation funds and newer players on the peripheries of direct markets see as one of their competitive advantages in this space is that they are not direct competitors with the firms that are setting up these vehicles. One adviser, however, said some of the reigning buyers have laid the groundwork for a peer firm to invest in continuation vehicles.

If Astorg’s strategy follows the traditional route of backing continuation funds of competitor buyout managers, which we understand it will, the firm will be hoping it can win over its buyout peers by convincing them to open the doors on what could be a manager’s prized assets that they aren’t ready to part ways with. Not a straightforward task, but if executed successfully, one that could pave the way for other similar managers to follow suit.

Write to the author: madeleine.f@pei.group