Secondaries can be a highly useful tool in an Asian fund manager’s toolkit as global market corrections persist and dislocations emerge, shared global investors at a SuperReturn Asia panel on Wednesday.
Secondaries refer to the buying and selling of preexisting private equity investor commitments to private market funds.
The Asian secondaries market has come a long way in the last 10-12 years, with limited partners (LPs) and general partners (GPs) displaying greater sophistication in their approach toward secondary solutions for their portfolios. The ‘stigma’ around secondaries has also largely faded among Asian fund managers, with many increasingly viewing it as a value-accretive solution which can align LP-GP interests.
The ‘stigma’ around secondaries has also largely faded among Asian fund managers.
“The sophistication in Asia is at a high level. I don’t think there’s a difference in the sophistication of deal types that you see in Asia versus what you see in the West,” said Arjun Bawa, partner and head of Asia at Fairview Capital Group.
Given the relative nascency of Asia’s private equity sector compared to the US and Europe, many LPs with exposure to Asia have yet to see strong cash or Distribution to paid-in (DPI) returns on their Asian portfolios.
The current market conditions will likely drive demand for such secondary solutions to unlock liquidity, particularly transactions which are more active in nature, added Paul Robine, founder and CEO of TR Capital Group.
This is raising the bar for Asian secondaries market as a whole. “Ten years ago, you could run a secondary business from Hong Kong or Singapore. Those days are over,” said Robine. “Today, you need to have on-the-ground presence with local teams in China, India, and Southeast Asia.”
The maturation of the secondaries market will also bring about a “dispersion” within secondaries as a category, commented panelists. This wouldn’t simply apply to fund performance across vintages, but also in terms of sub asset-classes like GP-led, LP secondaries, and structured equities, with each bringing about its own unique set of risk-returns, shared Yann Robard, managing partner at Whitehorse Liquidity Partners.
GP relationships will also play a crucial role, driven by the growth in GP-led secondary transactions in recent years.
“GP relationships are going to become even more important than they have been in the last 10-12 years,” predicted Pinal Nicum, Partner at Adams Street Partners.
“The best transactions are access-constrained. The best GPs – just like on the primary side – are picking and choosing who they work with in the secondary market today. So I think those things are going to continue,” he added.
The panel discussion “In Search of Liquidity: Unpacking the Complexities of the Secondaries Market” took place at SuperReturn Asia in Singapore on Wednesday.
The panellists were Pinal Nicum, Partner at Adams Street Partners; Paul Robine, founder and CEO of TR Capital Group; Yann Robard, Managing Partner at Whitehorse Liquidity Partners; and Arjun Bawa, Partner, Head of Asia, Fairview Capital Group. The discussion was moderated by Yash Gupta, Executive Director at Morgan Stanley.
The transcript below has been edited for clarity.
