PE Key Trends Blog

Will 2019 be the Year of Politically Motivated Secondary Sales?

Feb 11, 2019 11:18:06 AM / by palico posted in Palico PE Insights

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senate

Volume in the secondary market for closed private equity funds soared last year as much as 47 percent with record annual aggregate value estimates in this opaque market ranging from $70 to $80 billion according to various sources. Given historically attractive pricing for sellers and the unprecedented sums earmarked for secondary purchases, record volume makes sense. The average transaction on the private equity secondary market stands at 102.5 percent of fund net asset value, according to a recent Palico marketplace survey (sent to members last month) – the highest level we’ve ever recorded. Meanwhile, estimates from industry intermediaries for committed but unspent capital in the secondaries market are at all-time highs of between $180 and $200 billion.

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Secondary Pricing List - Secondary Funds Sell at Par or Better Despite Falling Stock Prices

Jan 17, 2019 8:05:21 PM / by palico posted in Palico PE Insights

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The typical transaction on the private equity secondary market is valued at 102.5 percent of net asset value in terms of mean, with the median at 101 percent, according to a Palico survey of limited partners who’ve successfully purchased stakes in closed funds over the last six months. This is the highest pricing Palico has recorded since we began tracking secondary transactions in March 2017. This latest survey covers 30 funds of all types from real assets to private debt, buyout and venture.

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PE Secondaries: Liquidity! Liquidity! Liquidity!

Dec 11, 2018 9:54:47 PM / by palico posted in Palico PE Insights

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Liquidity may have been hard to come by for PE investors in the 90s, but almost thirty years down the road it has become a demand. Regardless of the numerous reasons LPs have cited for selling their stakes, one thing is clear, they are less eager to wait for returns. So one can ask: are LPs going schizo? They’ve been investing in the PE market for years knowing of its illiquid state and 10-year plus lifecycles, so is waiting a lost art? And especially, what is fueling their growing desire to cash out?

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Q&A: Civilization Ventures Raises Capital on Palico

Nov 29, 2018 4:19:08 PM / by palico posted in Palico Q&A

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Shahram Seyedin-Noor is the Founder and General Partner of Civilization Ventures, a San Francisco-based venture capital fund investing at the intersection of health tech and synthetic biology. We recently caught up with Shahram to discuss his fund’s unique value proposition and his experience successfully leveraging the Palico marketplace.

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Q&A: Mindset Ventures Raises Capital on Palico

May 4, 2018 10:00:46 AM / by Robert Ientile posted in Palico Q&A, V2

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Daniel Ibri is the managing partner and founder of Mindset Ventures Sao Paolo. We sat down with Daniel and discussed some of the pains of fundraising for emerging market funds looking to expand outside of the constraints of their own borders. In this Q&A he explains why Palico is an essential tool for small funds and how it helped attract new investors beyond Brazil.

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A Cornucopia of Emerging Markets PE Funds

Apr 27, 2018 10:05:31 AM / by Robert Ientile posted in Private Equity Market, V2

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An International Monetary Fund World Economic Outlook report observes that emerging markets account for over 75 percent of today’s global growth, “nearly double the share of just two decades ago.” If you’re looking to participate in that growth the best way to do it is through private equity. Only a small portion of emerging markets expansion is captured through public equities. For example, there are relatively few stocks focused on fast growing consumer goods in developing economies. Indeed, the vast majority of rapidly expanding emerging markets companies are family-owned and in the private sector - precisely the businesses that PE managers successfully partner with. Though $61 billion was raised last year by emerging markets funds, the second highest amount on record, finding the best is difficult, given far-flung locations, the generally crowded fundraising market and the stretched resources of investors.

Palico’s Digital Marketplace Offers a Wealth of Emerging Markets Funds

Yet Palico offers a large variety of emerging market opportunities that can streamline the private equity investment process. Some two out of five primary and secondary investment opportunities among Palico’s listings are focused on the emerging markets of Asia, Africa, the Middle East and Latin America. Moreover, more than four out of five of those offerings are for funds of $250 million or less. They’re not only focused on dynamic family-run companies, but overwhelmingly on the more inefficiently priced small cap sectors of emerging markets. Primary and secondary emerging market opportunities also cover over 30 specialties, ranging from mezzanine finance in Mexico to impact investing in fast-growing Southeast Asian countries.

Don't think of it as a divorce. Think of it as a spinoff.

Emerging Market Listings Targeting Nearly $10 billion

Altogether, the aggregate capital targeted or raised by primary and secondary opportunities listed on Palico’s digital marketplace amounts to $9.8 billion. Among the fundraisings, the majority have already held at least a first close on capital commitments - demonstrating traction among investors. Some two out of five emerging market fundraisings on Palico represent first-time vehicles, the vast majority run by veteran, but hungry managers, eager to prove themselves as independent operators. This is in the context of recent evidence that the average first-time fund outperforms the average later-generation vehicle.

Helping LPs Find Investments, Palico’s Digital Marketplace Can Improve Returns

By bringing fundraisings and secondaries to desktops and smart devices, along with a wealth of information on those opportunities, Palico gives limited partners and their advisors more time to discover, analyze and invest in highly promising, frequently hard-to-find funds. Palico fits seamlessly with all channels of capital commitment, yet its digital marketplace makes fundraisings and secondaries - covering all strategies and regions - more accessible and affordable.

"With Palico, we essentially get a global marketing program, at scale, with no pressure on our resources. Palico is a great way to raise capital."

Daniel Ibri, Mindset Ventures, Sao Paolo, Brazil

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PE KeyTrends - The Silver Lining in Norway’s Rejection of PE

Apr 20, 2018 9:48:16 AM / by Robert Ientile posted in PE KeyTrends, V2

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Highlights:

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Smaller Funds Offer Better Returns & Downside Protection

Apr 13, 2018 10:00:39 AM / by Robert Ientile posted in Private Equity Market, V2

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Palico

With private equity fund sizes steadily increasing, anecdotal evidence from both investors and fund managers suggests that the lower mid-market and small cap sectors are less crowded than they once were - ironic at a time of record fundraising. Meanwhile, the marketplace for companies with annual revenues in excess of $50 million is more competitive than it’s ever been. And during a period of aggressive sideways expansion by large general partners into new strategies, we increasingly hear investors complain that they have little time to do anything more than re-up with existing relationships, most of which are focused on bigger market segments. Our message to all limited partners: using Palico avoids the ‘shoulda, woulda, coulda syndrome.’ Palico’s digital marketplace also easily and efficiently opens up a world of smaller and more specialized fundraisings to investors.

The Advantage of Scaling Up With a Fund Manager

Over time, of course, successful general partners running smaller funds tend to become larger general partners running bigger funds. A small, but significant subset of these managers experience the kind of explosion in demand over time and across fund generations that makes it difficult for investors to access their later, larger vehicles. This is yet another reason why limited partners - even the biggest - should maintain investment programs for smaller managers.

Small Funds and Specialist Funds May do Best in a Downturn

A particularly interesting academic paper that came out late last year indicates that PE-owned companies do better than non-PE-backed firms of similar size, purpose and profitability during downturns - a topic with plenty of relevance for fund managers and investors, given a near-record run of uninterrupted economic growth in the world’s major economies. In light of today’s record purchase price multiples, smaller funds, frequently specialists in uncrowded niches, or purchasers in the relatively neglected lower end of the buyout market, may do better than their larger counterparts in a downturn. Yet another reason why limited partners should consider smaller funds today.

Alternative PE - From the Four Corners of the Earth - is Palico’s Speciality

Helping smaller, harder-to-find funds standout is Palico’s speciality. Fund offerings with an investment focus covering 179 of the world’s 195 countries are listed on Palico, with more than four out of five vehicles focused on investing in the particularly inefficient small cap and lower mid-market corporate sectors. Additionally, two out of five operate in specialist sectors including agriculture, credit, timber, mining, water, shipping and intellectual property; and another two out of five focus on newer regions for private equity investment in Asia, the Middle East, Africa, and Latin America. A majority of secondaries sold on Palico involve funds that raised $250 million or less from investors. Some 80 percent of transacted secondaries are for stakes worth $10 million or less - what we call ‘small secondaries.’

$227 Million Invested via Palico

In 2017 limited partners invested $227 million in primary fundraisings and secondaries via Palico’s digital marketplace, overwhelmingly in smaller and more specialized funds. As average fund size grows amidst a record number of fundraisings, Palico’s digital marketplace helps primary fundraisings and small secondary offerings standout. Palico is making private equity ‘alternative’ again.

"Palico’s marketplace is a particularly valuable means of discovery in an industry where traditional fundraising frequently falls short."

Tom Clausen, Capvent

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A First: Catering to the Small Secondaries Market

Apr 6, 2018 10:09:16 AM / by Robert Ientile posted in Palico In Focus, V2

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Palico

Palico’s digital marketplace is the first venue that makes it easy to buy and sell small secondaries, these are stakes of $10 million or less, sold by limited partners after fundraising has closed (typically once the fund is largely invested, making it possible to evaluate return prospects with greater certainty). Small secondaries tend to get overlooked by the large, multi-billion dollar specialist funds that dominate the secondary market. The reason: Small stakes frequently require as much time to evaluate as considerably larger stakes, making them inefficient opportunities for larger funds. Palico puts LPs - of all types and sizes - interested in the secondary market directly into contact with each other. It’s a second hand shop where LPs who are not experts in this market can sell what they want and find exactly what they want, no matter what the size of the fund stake.

Palico’s Secondary Listings

Four out of five second-hand fund transactions initiated in Palico’s digital marketplace revolve around offers for private equity fund stakes worth $10 million or less. Some 45 percent of secondary transactions on Palico involve stakes of $5 million or less. In the six years since Palico’s digital PE fund marketplace launched, stakes with a combined net asset value of $451 million have been listed on the platform, covering an ever-expanding range of strategies from buyout to credit.

The Appeal of Selling and Buying Secondaries Online

Apart from specialists who have the requisite resources and connections, secondary selling and buying can be difficult. But on Palico, information from sellers is anonymously transmitted to buyers who’ve already expressed an interest in the fund or funds via wishlists. After receiving bids, sellers only reveal their identity to potential buyers if they choose to do so. For secondary buyers, Palico offers hard-to-find dealflow - and frequently hard-to-find funds - in just a few clicks.

Half of Palico’s Secondary Sales are for Smaller Funds

Some 50 percent of secondaries transactions on Palico involve funds that raised $250 million or less from investors. These smaller funds tend to focus on relatively neglected, and potentially attractively priced, small cap assets. They also frequently specialize in niche investment areas and in newer geographies where there’s less competition.

$227 Million Invested via Palico

In 2017 limited partners invested $227 million in primary fundraisings and secondaries via Palico’s digital marketplace, overwhelmingly in smaller and more specialized funds. As average fund size grows amidst a record number of fundraisings, Palico’s digital marketplace helps harder-to-find primary fundraisings and small secondary offerings standout, bringing them to the desktops and smart devices of interested investors the world over. Palico is making private equity ‘alternative’ again, even as the overall industry becomes mainstream.

"With Palico, we discover smaller and midsized fundraisings from outside of the mainstream and from outside of the world’s major financial hubs."

Arnaud Burel, COGEPA

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Palico's Digital Marketplace is a Spinoff Mecca

Mar 30, 2018 10:22:28 AM / by palico posted in Palico In Focus, V2

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Palico

Out of nearly 300 opportunities currently listed in Palico's marketplace, more than 40 percent are first-time fundraisings. The vast majority of those funds are run by private equity veterans creating their own firms from scratch. Among these, many were founded by teams of highly experienced managers coming together for the first time from disparate fund groups. Yet two out of five are spinoffs, run by exceptionally close-knit teams that have been investing together for years and who have collectively broken free from larger organizations. The average first-time fund is now outperforming the average later-generation fund, but spinoffs - due to their demonstrated cohesiveness - generate some of the greatest excitement among investors.

Palico's Rich Range of Spinoffs

Palico is not only a great place to find first-time private equity funds, it's a mecca for investors seeking to commit to promising spinoff teams. As erstwhile subsets of larger teams, spinoff groups are frequently specialists, active in less crowded sectors than the historic core of private equity - buyouts. Indeed, only 11 percent of Palico's spinoff fundraisings are focused on the buyout market. The variety of spinoff strategies on Palico includes private credit, turnaround, real estate and a host of growth niches. A third of Palico's spinoff fundraisings are also focused on emerging markets, far from the world's highly competitive money centers.

Bringing Alternative Private Equity to Investors

In today's mature private equity fund market, where a record 3,129 funds are seeking capital - some 42 percent more than just five years ago - it can be hard for limited partners to find the time to source and evaluate promising spinoffs, let alone the broader universe of first-time funds. Yet Palico's digital marketplace brings a wide choice of promising smaller and specialized managers of all types to the desktops and smart devices of limited partner firms in every region of the world. In 2017, those LPs invested $227 million in primary fundraisings and secondaries via Palico's digital marketplace, overwhelmingly in smaller and more specialized funds. Palico is making private equity 'alternative' again, even as the overall industry becomes mainstream.

"It's great to push a button and see everything that's out there. Palico helps me do my job better."

Sabina Eder, Bank Austria

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