LP led secondaries

Hi All,

I have an interview with a private equity firm, they do only LP led secondaries, can anyone share any insights on how modelling is done, fees are calculated and unfunded part is valued. Would be grateful if someone can share their case study for my reference. 

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Comments (5)

Most Helpful
Nov 24, 2021 - 3:22pm

At a high level there are 2 components that drive your returns

  • forming a view on the pool of assets that you are purchasing. Usually there are a few that make up the majority of the NAV so you can focus your diligence on understanding these. In particular, the exit valuation and timing.
  • the discount you are buying in at as well as the reference date. Even if the discount isn't that great, if you are using a stale reference quarter then you are getting an implicit discount (assuming assets are written up).

So the cash flows are the discount to NAV at entry and the rest of the CFs are the same as any other fund investment (capital calls for fees, investments or fund expenses; distributions for dividends or exits).

Nov 24, 2021 - 4:15pm

Thank you very much for the response Franco, one additional question is how to value the unfunded? Is it fine to use a threshold IRR and net multiple (assuming 15% or 1.5x) and value the unfunded based on the one which gives lower value? However we won't have any cashflows for the unfunded so does it make sense to take the net multiple based on remaining life?

Nov 25, 2021 - 4:18am

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