Secondaries Comp / Culture in 2023

Does anyone have insight into what compensation, culture, and exit opps tend to look like for associates joining secondary shops. Focused on experiences at BX Strategic Partners, Alpinvest, and Lexington. Also what do exits look like, possible to go to direct PE after a stint at a secondaries shop?

 

Going through the process of lateraling right now as an AS2 (ignore title). Initial offers I'm getting are 140-160k with 50%-80% bonus target. 

WLB depends entirely on the firm but is certainly better than IB or direct PE.

Next to zero chance of moving to direct PE unless you're at a firm like Partners Group where you may be able to network and move internally. 

 

What are the exit opps for associates coming out of secondaries programs. Is it really that tough to get into traditional PE or VC / Growth? 

 
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What are the exit opps for associates coming out of secondaries programs. Is it really that tough to get into traditional PE or VC / Growth? 

Secondaries is the exit opp, plenty of people never leave the industry. Otherwise, it's to asset management / allocator roles usually, and I've seen some smaller Corp dev roles too.

 

Also worth mentioning secondaries investors moving to secondaries intermediary roles. Pay may be better. I would imaging very hard to move back to the investment side.

 

Asking from a RE perspective as that’s all I know and nobody on the bloody RE forum appears to know much about secondaries. Curious about the space as well. Are there opportunities to capitalize upon distress here or is the space more so dominated by GP led transactions where you are recapping a portfolio whose business plan has been executed and thus are generating core or core plus returns? Do RE secondaries players also purchase stakes in debt funds ? It seems a bit different in the sense that in traditional acquisitions you deal with a buyer and negotiate a PSA. In this case, you are removed from the ground level markets and are instead negotiating between a fund manager and LP's in that fund? Do you think this is a good niche to go into and build a career in? It seems almost as if you are a capital allocator. Are the deals you work on in this space interesting ? If I'm purchasing a stake that is 50% invested and 50% capital has not yet been called, can I still lever the whole stake I am purchasing? Also, if a secondaries specific fund is raised, then is there not pressure to deploy capital just like any other closed end fund? Thoughts on giving this space a shot?

 

Think it's similar at junior levels given cash comp is based on management fees. Fees are lower for secondaries teams but the fee gap is offset by secondaries being more scalable.

Would imagine the gap in pay diverges significantly when carry is considered. Some structural advantages that direct PE enjoys is higher expected MOICs for funds (typically 2.5/3x gross vs 1.5-2.0x) and higher carried interest fees (20% vs 10-12.5%).

If you're successful you'll be highly paid regardless. Illustrative best case scenario may be something like $20 million net worth in secondaries by 50 vs 75 million in direct PE due to carry gap.

Trade off for less pay is much better work life balance. I doubt partners are working more than 50 hours a week. If they are it would be because they are including travel in that number.

 

taking from the above Lexington e.g. they are raising $15bn now. Doing a rough calc with assuming a 1.7x on that size and 12.5% (what I think they have, in any case industry is 10-15%) that's roughly $1.3bn carried for a team size of c.50 people as per their homepage. Assuming Man Co takes 25% that's around $20m per team member if I'm not missing anything

 

Don’t think my comment posted so I’ll try again. When does allocation typically kick in for secondary funds? I’ve heard of associates getting allocation at smaller funds but at larger more established funds is it VP or principal / director level?

 

Evercore PCA is the highest revenue generating group at the entire firm

 

what type of secondaries firm is this? is this someone with 8-10 years experience?

 

If we're talking about the top firms, then MF PC is higher than that at that level. Senior VP/Director is ~$800k-$1MM at the best shops (in line with MFPE), so it looks like secondaires comp is at a slight discount

 

interesting - my sense is total comp is higher in secondaries though due to carry being different in PC

 

If we're talking about the top firms, then MF PC is higher than that at that level. Senior VP/Director is ~$800k-$1MM at the best shops (in line with MFPE), so it looks like secondaires comp is at a slight discount

If by senior VP you mean someone 3 years out of business school you'll be hard pressed to find many funds paying a million dollar cash

 

It’s less intense because you are monitoring rather than actively managing investments post close. I don’t find the upfront DD work to be any less stressful than when I was on the directs side. This is largely because you are expected to do a larger quantum of deals each year than on directs. So while each individual progress is less rigorous, they add up 

 

Alpinvest - overly European in investment allocation, very risk averse, doesn't like to invest in tech

HarbourVest - huge shop, decently regarded

LGT - bunch of pricks work there

Coller - super crummy returns. Embarassing.

 

Thanks! How's Alpinvest's and LGT's return and comp though? I suppose Harbourvest is good and Coller is bad. 

 

Would secondaries offer more promotion opportunities than traditional PE since it is growing faster and a less competitive space?

 

100% 

it is basic unit economic. Lots of revenue in the space (evercore pca is highest earning group in the whole firm) = not that concentrated = higher revenue per head

 

What is the longer term outlook for secondaries as a strategy? Is the recent growth just due to short term liquidity/rebalancing need or are there some structural growth factors that drive the growth of secondaries to outpace PE in general?

 

Secondaries is fast growing industry with immense upside in the long-term as LPs and GPs become more sophisticated with different liquidity solutions. LPs are now actively managing their portfolios that are now over-allocated to PE as private valuations haven't followed public markets and with sponsor M&A and IPO exits way down in a challenging macro environment, many GPs are looking to double down on their rock star assets with secondary capital. The main problem hindering growth is honestly lack of capital on the buyside. I currently work at PJT Park Hill and the amount of deal and pipeline volume is insane. The group continues to grow and junior talent is paid top dollar. 

 

Good to see someone in RE secondaries here! Have a few questions about the space if you don’t mind as I’m considering an opportunity in this space.

Are there opportunities to capitalize upon distress here or is the space more so dominated by GP led transactions where you are recapping a portfolio whose business plan has been executed and thus are generating core or core plus returns?

Do RE secondaries players also purchase stakes in debt funds ?

It seems a bit different in the sense that in traditional acquisitions you deal with a buyer and negotiate a PSA. In this case, you are removed from the ground level markets and are instead negotiating between a fund manager and LP's in that fund? Do you think this is a good niche to go into and build a career in?

Are the deals you work on in this space interesting ?

If I'm purchasing a stake that is 50% invested and 50% capital has not yet been called, can I still lever the whole stake I am purchasing?

Thoughts on giving this space a shot? Opportunities you see in the space? It seems as if Ares / Landmark shit the bed on fundraising. How does that bode for future of RE secondaries ?