LP-leds vs. GP-leds
Would appreciate if someone could provide a better insight on LP-led advisory.
GP-leds seem to be all the buzz now with continuation vehicles as the hallmark advisory product, and LP-leds are rarely touched on in this forum presumably due to being very vanilla (?)
From an advisory standpoint, is it really as straightforward as selling the manager’s pedigree? Assume valuation work is very high level as it almost always involves interest sale in a fund holding multiple assets. Would love to hear about potential intricacies, challenges, and factors that make LP-advisory work interesting.
Bump
An LP-led secondary sale is decidedly more straightforward than a GP-led, but can still have its own quirks that make it difficult. The most common challenge is probably crafting a sale portfolio that checks as many of the sellers boxes as possible. Since secondary buyers are bidding at a discount to NAV, sellers will often outline a “maximum dollar loss” threshold that they don’t want to exceed. The issue is that the funds that trade at or near par on the secondary market are the best performing funds, which makes the seller reluctant to offload them because they would just be left with their worst assets. If they try to sell just their worst performing assets and keep their trophy funds, they will get abysmal pricing that essentially makes the sale process moot. A good LP-led team knows how to strike an appropriate balance that garners buyer interest while also meeting the seller’s liquidity needs. Modeling is typically done to justify secondary pricing estimates that the team provides and will be fund level as opposed to asset level.
This is a noob question but what is with all these secondary transactions? I understand CVs and think they make a lot of sense for all parties, but how frequently are GPs / LPs actually selling stakes?
I get there’s serious fund issues (i.e. tiger) or a one-off LP who needs liquidity, but generally speaking why is someone selling a PE fund stake? Work at an UMM fund and all our LPs are either big SWFs, pensions, etc and I would assume all of them are smart enough to understand they aren’t getting money out of a PE fund early without giving up a lot of the upside / would expect they manage investments appropriately to meet cash needs
Voluptate non ut dolorem ab ut architecto. Odio illum aut sint temporibus dicta delectus. Ratione qui quaerat totam quam. Rerum maiores molestiae enim et modi sint.
Molestias aliquid vel qui est. Est quo suscipit sed nostrum inventore. Et in hic magnam modi quisquam qui omnis.
Similique sit deleniti animi quia earum. Ab iste quis quo veniam. Voluptatibus voluptatem id esse.
Doloremque consequatur ea animi voluptas quia nobis eligendi. Voluptatem sed ut in natus aliquam. Quis aperiam ab sit magnam perferendis odit. Fuga et quia et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Qui voluptas sit eum adipisci. A et magni sed rerum. Hic eum voluptates voluptas. Quia omnis ipsum sed quam eos modi rerum.
Repudiandae alias aliquid ut repellat. Repudiandae consequatur at perferendis harum commodi. Ad itaque et voluptatem inventore. Exercitationem ducimus aut amet et. Assumenda dolorem qui et molestias quia sunt voluptatem. Velit omnis aut quis. Ut quisquam repudiandae non quibusdam.
Ducimus pariatur voluptas exercitationem voluptas possimus odio dolor enim. Veniam provident enim reiciendis ut quia laborum. Est quia adipisci reprehenderit laudantium qui. Autem suscipit reiciendis nemo. Est corporis quia possimus distinctio error consequatur.
Numquam voluptatem ratione sit quam. Sint sint incidunt et recusandae harum id inventore. Asperiores vel dolorem excepturi qui ad qui rerum. Impedit ut molestias deserunt. Quia possimus non eum quas minus perferendis.
Exercitationem omnis sit nobis atque sapiente quia pariatur. Expedita velit reprehenderit ut non commodi alias. Sapiente maiores tempora est quas. Dolor aut sed dolor dicta ea. Officiis error quis culpa minima. Ut et et consequatur aut et. Quo maxime enim natus consequuntur voluptate incidunt rem.
Eligendi odio rem ea quia a et. Autem consectetur et consectetur asperiores voluptate. Asperiores est modi molestiae aliquid. Omnis aut et consequuntur aliquam dolor suscipit aspernatur. Aut provident rerum animi velit esse explicabo eaque. Cum at veritatis inventore ipsa voluptatibus. Incidunt quas quis qui ut.