What types of deals does the EMEA team plan to focus on in 2021? What are you most excited about?
I am excited about further expanding the EMEA secondary advisory business of the UBS private funds group and strengthening its leadership team. PFG is a global franchise operating through truly integrated teams that have strong relationships and expertise across the private capital markets, including private equity, real estate and infrastructure.
PFG recently became an integral part of the investment bank’s new alternative capital group, which serves private equity firms, family offices and other long-term investors worldwide, bringing PFG and our sponsor coverage teams and also PFG and our sector and country coverage bankers closer to better service our clients.
We strongly believe that our secondary liquidity solutions will effectively complement the broader investment bank’s service offerings and long-standing relationships with the world’s large to mid-sized sponsors.
In terms of PFG EMEA’s plans for 2021, one of the areas we will be looking at is the growing market of sponsor-led liquidity solutions. This is where our DNA lies, as our team members have buy-side experience and we have executed many of these slightly more complex and concentrated continuation transactions in the past.
We will also work on LP-led fund portfolios, as we firmly believe that both segments complement each other, especially in the current market environment in which broad fund portfolios are rarer than usual and diversification and early liquidity profiles are sought after by buyers.
There has been a marked shift towards GP-led deals in recent years, and particularly in 2020 due to the pandemic. What is UBS’s approach to the GP-led/LP sale split?
We want to continue to be known for being a trusted advisor for sponsors and limited partners alike. On the secondary side, we look to spend a majority of our time on sponsor-led transactions, as we think the trend for concentrated liquidity solutions around one or a small group of attractive and growing assets coupled with the potential need for additional capital and runway will continue to persist, especially in resilient sectors that have proven to do well in the current crisis.
Just look at the growing size and accelerated pace at which secondary funds are raising capital, both as pools investing in diversified exposure but – more recently – also as specialist funds investing in concentrated sponsor-led transactions. There is definitely a lot of room to grow from here as an ever-increasing number of sponsors are realising the benefits of these transactions.
You’ve joined UBS in a year when face-to-face meetings are tricky or impossible. How have you been engaging with clients? How about with your new colleagues?
Having transacted with a large number of sponsors and secondary professionals over the years builds trust. This trust brings one closer to clients, they know you and you know them.
Generally speaking, I am engaging over the phone or video conferences. The industry has adapted very quickly to the new normal. And similarly with my new colleagues, we try to speak and engage as much as possible over phone and video conferences. UBS’s information technology has allowed a smooth plug-and-play experience as well.
Although I believe face-to-face meetings and onsite company visits are important, sponsors, company management teams and secondary buyers have shown that they are well-versed in video conferences. Both primary fundraises and sponsor-led continuation vehicle transactions have successfully closed in 2020, all fully virtual. This flexibility is positive for our industry.
UBS last year launched an asset-backed financing business as a tie-up between its secondaries advisory unit and global equity derivatives group. How much has the bank lent since launch and with what types of clients? What are the plans to further grow this business?
We have been very active in providing loans to a wide range of clients including secondaries funds, family offices and institutional investors in the pension, endowment and foundation markets. This broad set includes both primary and secondary investors.
How do you see the role of advisors evolving amid this year’s crisis and into the coming year?
We believe that the role of the advisor will evolve further. Having said that, it has always been important to support all stakeholders to achieve the desired outcome in a multi-lateral undertaking. The role of the advisor has always been critical as the inherent conflicts of interests need to be addressed and managed and the outcome needs to be fair and balanced for all sides.
This is particularly true for the limited partners, as they are the ultimate owners of the asset or assets – we truly believe it is crucial to communicate with the limited partners and the LPAC multiple times throughout a sponsor-led secondary process – communication with everyone is key here. This is even more nuanced in an increasingly virtual world, in which a sponsor wants to partner with an experienced, agile and disciplined process orchestrator to keep all stakeholders aligned.
There is a clear benefit for a sponsor to engage an advisor that can offer value-added, best-in-class service, especially when it comes to sector expertise of the asset at hand. Our sector bankers are able to effectively support the underwriting process of the secondary buy side from an asset- and sector-specific angle. This is a clear advantage for a larger investment banking outfit such as UBS that can offer a broad range of capital market services.
Sandro Galfetti is managing director and head of EMEA secondary advisory within UBS’s private funds group. He was previously a managing director at PJT Park Hill and has prior experience at Capital Dynamics. He is London-based.