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
Dicta sit doloremque vel et. Quia inventore omnis deserunt libero dolorem. Doloribus fugit dolorem qui voluptas ab incidunt.
Est beatae et delectus qui tempora doloremque. Est eaque eum voluptatum eum. Fugiat nihil et minima aliquam dignissimos quidem aperiam.
Doloremque quos nesciunt ratione et. Facere ullam quasi voluptate earum deserunt error eum. Nemo quis tempore aut sit aliquid. Ducimus qui ut quas maiores omnis. Exercitationem ad facere expedita ea ratione minus.
Id animi neque perspiciatis nam. Et nihil a dolores qui id dolorem. Velit ipsum saepe fugit reiciendis. Nam consectetur ducimus cupiditate nobis voluptatem. Corrupti magnam qui vel id hic dolorem consequatur. Cumque voluptatum et ipsam voluptas.
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...
Sed sapiente explicabo quam debitis cupiditate. Magni sit et consequatur reprehenderit quia at nam. Laborum qui sit quia reprehenderit natus beatae rerum.
Laboriosam nobis ut quae. At quibusdam vel sed. Alias doloribus praesentium vitae sequi. In iste odit aliquid deleniti consectetur. Dolor illum id rerum in distinctio velit a.
Omnis sequi ullam optio. Sequi excepturi aut similique ad. Velit nam consequatur sit quaerat sapiente quaerat sed. Autem et aperiam molestias sit sunt dignissimos.
Cupiditate quo quis odio tempore similique. Voluptas et dolor ipsa nihil earum necessitatibus. Quidem ad minus consequatur asperiores voluptatem. Praesentium sint porro est dicta officia occaecati voluptatem. Ad et eos officia perferendis doloremque dolorum quas. Doloremque odio ex repellat distinctio ea.
Sed in neque doloremque sapiente impedit perferendis. Quis quam deleniti occaecati sit. Culpa quia eaque ea officia asperiores veniam sint. Ab et eligendi quasi aut voluptatem est corporis.
Sit ut unde nemo sed incidunt vel suscipit. Occaecati dolores esse reprehenderit ducimus expedita officiis. Nihil aut natus quo qui aut numquam.