Secondaries vs. Direct
Many pros & cons on both sides of the aisle
Direct
- Pros: Mgmt. team exposure, board exposure, deep industry knowledge, port co exit opps
- Cons: Deep diligence process, widely different experiences depending on firm, sweaty or longer hours, competitive processes, every investment is important
Secondaries:
- Pros: Many different transaction types, growing industry, diversification, industry relationships, good comp / hours, good growth opps
- Cons: No operational experience, no direct company exposure, exit opps limited to secondaries, asset managers
You could always work for a Secondary Direct fund
From my understanding - these investments usually don’t come with any operational access. Is this true?
Some Secondary Direct firms will take board seats
Thanks for sharing your thoughts. I’m currently considering move to secondaries as I found myself not enjoying in the operational details. What do other people think?
Might I also suggest taking a look at direct co-investment platforms. There you do direct deals but are minority equity and therefore "don't drive the bus". Still get access to board observation seats and higher deal flow as your main job is to digest the diligence materials already quarterbacked by the GP.
How do comps differ in the long term? I know secondaries fund charge less fee but given the growth of the space and theoretically quicker timeline to deploy capital and get cash distribution, do secondaries economics match MM PE at least?
Believe in the last 10 yrs the fund sizes at the top players has grown proportionally even with lower fees.
Largely correctly I think. On the Secondaries Cons side- for GP-led single asset deals, if you're leading deals you'll be given access to the company directly for due diligence.
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