Secondaries advisory: moving from an LP-led focused role to GP-leds
Hi all,
As the title suggests, I’m wondering how difficult it is to transition from the LP-led side to GP-leds.
Having worked on both, I appreciate that each requires a somewhat different skill set. However, my intuition is that the move shouldn’t be overly challenging, given that both require a solid understanding of fund mechanics, valuation, and the secondaries market more broadly.
That said, I’ve come across a few posts suggesting that it’s harder than it looks, particularly if you spend too long focused on LP-led transactions and end up getting pigeonholed.
For context, I’ve been working in LP-led advisory for a year, with some exposure to GP-led transactions as well. Longer term, I’d like to specialise in GP-leds.
I’d really appreciate hearing from anyone who’s made the transition.
Cheers!
Transitioning from an LP-led focused role to GP-leds in secondaries advisory is certainly feasible, but it does come with its challenges. Based on the most helpful WSO content, here are some key insights:
Skill Set Overlap: Both LP-led and GP-led transactions require a strong grasp of fund mechanics, valuation, and the secondaries market. However, GP-led deals often demand deeper engagement with GPs, more complex structuring, and a nuanced understanding of portfolio company dynamics. Your exposure to GP-leds already gives you a head start.
Challenges of Transition: The perception that transitioning is difficult stems from the risk of being "pigeonholed." Spending too long in LP-leds can make it harder to demonstrate the hands-on structuring and negotiation experience typically associated with GP-led transactions. GP-leds often involve bespoke solutions, which require a more active role compared to the relatively passive nature of LP-led deals.
Advantages of GP-leds: GP-led transactions offer benefits like better access to information (direct dialogue with GPs) and the potential for higher returns (e.g., MOICs of 2x net and 20% net IRR). However, they also come with higher fees and the challenge of assessing the quality of remaining assets.
Strategies for Transition:
Long-Term Outlook: The GP-led market is growing rapidly, with record transaction volumes expected. This trend suggests increasing opportunities for professionals with GP-led expertise, making it a worthwhile specialization.
By proactively building on your existing experience and positioning yourself strategically, you can make the transition and thrive in the GP-led space.
Sources: Q&A: PE Secondaries Principal, Q&A: PE Secondaries Principal, Pitchbook: PE Secondaries to Boom in 2023
bump
If you’re a first or second year analyst and have some GP-led reps we’d probably give you a look and reset you 1 year. At the associate level we wouldn’t.
Hiring analysts / associates currently for GP-led secondaries advisory… mostly targeting people with direct GP-led experience or M&A experience.
Thanks for the answer. Curious to hear if you think it’s a firm-specific thing or industry-wide, because logically it shouldn’t really be an issue since for both one need to have a solid understanding of fund waterfalls and valuation methodologies.
Do you think that it would still be tough even after a few years in LP-leds at a top-tier shop?
It’s not fund waterfalls we are concerned about tbh. That stuff is relatively easy to learn and we have templates for that. It’s understanding how to build a real projection model and LBO. You don’t do that in LP-led advisory. LP-led advisory is almost purely process oriented. There’s also many other ad-hoc analyses that you’d do in a GP-led that you’d never touch in an LP-led. Just in the 5 years I’ve been in my seat, I’ve seen the depth of diligence and analyses increase significantly as buyers have gotten much more sophisticated on the GP-led side. It’s still not M&A level diligence but it’s moving in that direction.
It does vary by firm as some firm’s secondary teams are less modeling intensive than others depending on how they split the work load with industry teams / the client.
How would you recommend an incoming summer analyst go about transitioning to GP-led? Are internal transfers generally doable or would it be better to re-recruit FT for GP-led seats at other firms?
It's not that different.
The most difficult thing right now will be just finding an opening and actually getting a job offer period, let alone making a LP to GP change.
Needs to be done at analyst / asso stage
Do people ever go from secondaries buyside to PCA?
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