How technical is secondary advisory?
I've interviewed with and casually spoken to a few people in secondary advisory. What everyone has said is that secondaries is actually quite technical, works hand in hand with coverage groups, gets a lot of exposure to the models, etc.
For those who have more experience, how much is this true? Is the technical foundation you build from working in secondaries comparable to traditional IB groups?
Why do the exits lag behind even other product groups (eg. LevFin), and coverage groups? Is this primarily because of secondaries lack of recognition by headhunters and people on the buyside, or is the experience you get as an analyst actually worse?
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bump, does anyone have insights?
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I will preface my response by saying that perhaps on each team (buy or sell side) not everyone needs to be super technical and often there will be “model guys” to whom that work is entrusted. I think the stereotype of secondaries being non-technical comes from the majority who aren’t doing technical stuff frequently. There’s also many deals where technical analysis is less essential (buying an LP book at a deep discount in a less-than-competitive process is not tough math to figure high level)
However the modeling can get quite complex if you’re the lead bidder (or advisor evaluating lead bids) on a competitive, high-priced and BN+ deal where a couple bps can translate into 10s of mm in proceeds. In these situations, the model basically boils down to a bunch of LBOs being run up through a fund-level waterfall model to get to net returns. Can get additionally complex if you introduce structural features like prefs, modeling the impact of txn-level leverage, or cross checking the bottoms up model with a statistical model.
Ultimately the finance community is prestige driven and being “close to the asset” is probably king in the eyes of a randomly selected market participant. Hedge fund quants have exceptional modeling/mathematics chops but you don’t see them getting love from banker wannabes - no harm, just a different investing style with its own yardstick and cultural mores.
Thanks
Here is what I’ve noticed:
4. The secondaries skill set it very niche and specific - hence not very transferrable elsewhere. Your best bet might be IR / product management roles at established PE firms, or get a M7 MBA (not a very popular route as people in secondaries tend to stay).
IR is only an exit for primaries. There are a lot of high performing single asset funds that buy gp-led funds and have high carry. Co-investment funds, secondary funds (both lp-leds and gp-leds), alternative managers. A lot of exit opps and I'd argue its not that difficult to go from a gp-led fund to a buyout.
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