Secondaries - what do you actually do

In the realm of secondaries private equity (PE), professionals engage in a variety of tasks that revolve around purchasing existing PE investments from original investors (General Partners or Limited Partners) who are seeking liquidity. This can include assets like stakes in funds or portfolios of direct investments. Here’s a breakdown of what you might expect in terms of daily activities and why some might prefer this area over direct PE:

1. Transaction Variety and Diversification: In secondaries, you deal with a broad spectrum of transactions. For example, you might work on a deal where you're buying a portfolio of stakes across several funds, which could include a mix of venture capital, growth equity, and buyout funds. This variety allows for exposure to different strategies, geographies, and sectors within a single transaction, enhancing diversification.

2. Sample Engagement: A typical engagement in secondaries might involve conducting due diligence on a portfolio of fund interests being sold by a pension fund. This process includes analyzing the historical performance of the funds, understanding the underlying assets in these funds, forecasting future cash flows, and assessing any potential risks. The goal is to determine a fair purchase price that reflects a discount to the net asset value, considering factors like the remaining fund life and market conditions.

3. Reasons for Preference Over Direct PE:

   • Work-Life Balance (WLB): Professionals in secondaries PE often experience a better work-life balance compared to those in direct PE. This is partly because the investment process can be more streamlined and less time-intensive than the direct sourcing and extensive due diligence required in direct PE.
   • Lower Risk: Investing in secondaries can be perceived as lower risk. You have more visibility into the track record of the funds or assets being purchased, as opposed to betting on future outcomes in direct PE.
   • Quick Deployment of Capital: Secondaries allow for quicker deployment of capital since the assets are already existing and do not require the lengthy developmental phases typical of direct investments.

These elements make secondaries an attractive field for many finance professionals, especially those who value a diverse exposure to different investment types and a potentially more predictable work schedule.

Sources: Secondaries PE - Any insight on work and lifestyle?, Direct PE to Pension/Endowment, Why Direct when you can invest in Secondaries?, Secondaries Comp / Culture in 2023