PE Key Trends Blog

A First: Catering to the Small Secondaries Market

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

0 Comments

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

Read More

Palico's Digital Marketplace is a Spinoff Mecca

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

0 Comments

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

Read More

Tariff Threat Increases the Appeal of Uncorrelated PE Investment

Mar 16, 2018 10:15:39 AM / by Robert Ientile posted in Palico In Focus, V2

0 Comments

Palico

It’s difficult to tell how serious the threat of multiplying trade barriers will become for world commerce after an executive order mandating punitive U.S. tariffs on steel and aluminum imports was signed by President Trump a week ago. The Trump administration is holding out the possibility of selective exemption, dependent, it would seem, on negotiations with U.S. trade partners. But whatever the fallout, international private equity investment will continue. And with markets becoming more volatile, investors will seek out - in growing numbers - off-the-beaten-path private equity investments, or those that show the least correlation with the global macro economy.

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

That’s just what Palico’s digital marketplace for private equity fundraisings and secondaries specializes in. 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 middle market corporate sectors - far from the world of major indexes. Additionally, some 40 percent of the funds in Palico’s marketplace focus on specialities, covering everything from litigation finance to water technology, with the vast majority intended to show little correlation with the direction of the macro economy. A majority of secondaries sold on Palico involve funds that raised $250 million or less from investors - again hitting that uncorrelated, micro investing sweet spot.

$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 off-the-beaten path fundraisings and secondary offerings in smaller funds 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.

"Palico's marketplace offers a great way to connect with GPs. It allows us to cast a very wide net for investments, which is necessary in today’s private equity market."

John A. Haggerty, Meketa Investment Group
Read More

Making Private Equity Alternative Again

Jan 19, 2018 9:59:32 AM / by Robert Ientile posted in Palico In Focus, V2

0 Comments

Palico

In the six years since Palico’s online marketplace for private equity funds was founded, average fund size in the industry has nearly doubled to $1.3 billion. This, along with record amounts of capital available for investment, is a sign of rude health. Yet larger and larger funds competing against each other are likely to have a tougher time producing the kind of outsize returns for which PE, historically characterized by smaller funds and inefficiency, is justly celebrated.

Bringing Hard-to-Find Smaller Funds to Investors

In today’s mature private equity fund industry, smaller vehicles, which frequently operate in less crowded niches, are a valuable source of alpha. The trouble is finding them in a global marketplace where a record 3,129 funds are seeking capital - some 42 percent more than just five years ago. Palico’s digital marketplace brings a rich choice of promising smaller and specialized managers to the desktops of some 1,500 limited partner firms in every region of the world.

Palico’s Listings

Four out of five fund managers raising capital on Palico are seeking $250 million or less, intending to focus on relatively neglected and potentially attractively priced small cap assets; three out of five qualify as emerging managers, i.e. those raising their first or second fund - though most have previous experience at larger funds; two out of five operate in specialist sectors including agriculture, 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. Listings in Palico’s secondary market are dominated by small secondaries - stakes of $10 million or less in funds that have finished fundraising and are already investing.

$227 Million Invested via Palico

In the last year alone, limited partners have invested $227 million, overwhelmingly in smaller and more specialized funds, via Palico’s online private equity fund marketplace. As Palico becomes associated with these off-the-beaten-path fundraisings and secondaries, it’s making private equity an alternative investment category once again, even as the overall industry becomes mainstream.

"Palico gives us access to investors that we would otherwise have found only with great difficulty, if at all."

Johnny el Hachem, La Compagnie Benjamin de Rothschild
Read More

Family Offices & HNWIs Love All Types of PE Funds on Palico

Jan 5, 2018 9:35:12 AM / by Robert Ientile posted in Palico In Focus, V2

0 Comments

Palico

Out of the nearly 3,000 accredited limited partners seeking primary and secondary private equity fund investments in Palico’s digital marketplace, 19 percent are either from family offices or are high net worth individuals. Their numbers among Palico’s limited partner members are second only to fund-of-funds professionals - roughly 1 out of 4 Palico LP members. If we assume that the overwhelming majority of registered investment advisers (5 percent of Palico LP members) act on behalf of family offices and high net worth individuals, then FO & HNWI representation on Palico exceeds that of funds-of-funds.

In Satisfying FOs & HNWIs, Palico Helps Fundraise for a Wide Variety of GPs

A range of industry statistics indicate that with the exception of sovereign wealth funds (5 percent of Palico’s LP members), family offices & high net worth individuals have been the fastest growing private equity investor group over the last decade, though pension funds (9 percent of Palico’s LP members) still lead the pack. FOs and HNWIs are also among the most entrepreneurial and eclectic of limited partners, investing in a particularly broad range of PE strategies, across all regions and in first-time funds and later generations.

Examples of Eclecticism

That eclecticism is demonstrated by their nichey investment style (see above table). Three out of five family offices & high net worth individuals in Palico’s marketplace are pushing into specialized real asset categories - i.e. investing in infrastructure, real estate and energy & natural resources. By contrast, a less important (but still significant) one third of funds-of-funds seek real assets on Palico. Compared to other LP categories on Palico, FOs & HNWIs also tend to overweight investment in debt and structured equity, turnaround, and in the offbeat category of esoteric assets (this could be anything from investment in patents, to water technology to class action lawsuits).When it comes to the traditional, two out of five FO & HNWI members invest in classic buyout funds, versus three out of five fund-of-funds professionals.

The Advantage of a Digital Marketplace for FOs & HNWIs, and Others

One common problem faced by limited partners is a lack of requisite resources for researching the variety of private equity fund investment choice, whether in the primary or secondary market. Today, a record 3,129 private equity funds, ranging from buyout to credit vehicles, are targeting a high of $1,152 trillion.1 Over the past year alone, the number of fundraisings worldwide has risen 7 percent, while visibility in the private equity secondary market is notoriously opaque. We believe that as PE investment options grow, LPs who neglect digital marketplaces like Palico miss out on the potential to further improve their returns. By bringing investable fundraisings and secondaries to desktops and smart devices - along with a wealth of relevant information - Palico extends the reach of limited partners, general partners and their advisors, making the best opportunities more accessible and affordable.

1Source: The Triago Quarterly, December 2017

"We secured several commitments using Palico and the standout element was the remarkable efficiency of the digital marketplace."

Brett Hickey, Star Mountain Capital
Read More

Funds-of-Funds & Finding Needles in Haystacks

Dec 14, 2017 6:44:41 PM / by Robert Ientile posted in Palico In Focus, V2

0 Comments

Palico

These days, when funds-of-funds search for ideal fund investments, it can be a bit like searching for a needle in a haystack. Fortunately, many funds-of-funds have gotten very good at finding the best funds - in part because of digital marketplaces like Palico.

The Rough Years

In the years immediately following the financial crisis, many private equity investors dealt with losses by becoming more adept at vetting investments on their own. They also became more cost conscious. As annual private equity fundraising entered post-financial crisis recovery, roughly doubling between 2010 and 2014 to $438 billion, commitments to funds-of-funds bounced between $17 billion and $22 billion annually, beginning and ending the period at the former sum.

The Renaissance

Funds-of-funds had to reinvent themselves to stay relevant and since 2014 they have. The average annual fee (charged in addition to fees levied by funds in their portfolios) has dropped by a fifth to 80 basis points and and annual fundraising rose 53 percent through the end of last year to some $26 billion, according to Preqin. At the same time, funds-of-funds have, in general, shifted away from a focus trained overwhelmingly on bigger, mainstream buyout funds. They are now skilled hunters of smaller and mid-sized funds, many of which are specialists in niche investment areas or non-traditional geographies for private equity.

Getting Back to Finding Needles in Haystacks...and Palico

The shift to harder-to-find small and mid-sized funds has done much to revive the fund-of-fund value proposition. But it’s also made the mission of funds-of-funds more difficult. Adding to the generic challenge of searching for promising smaller and mid-sized funds is a more than 50 percent increase in the number of open fundraisings over the last four years to 3,040 today. Finding the proverbial needle in a haystack is a daunting task. That may explain why 329 fund-of-funds organizations, in their role as limited partners, have joined Palico’s marketplace to search for both primary and secondary fund investment opportunities. Out of 11 investor categories on Palico, ranging from family offices to sovereign wealth funds, funds-of-funds account for the second highest concentration, making up some 16.2 percent of the 2,034 accredited LP firms that are part of the marketplace. Only family offices edge them out at 16.

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

By bringing investable fundraisings and secondaries to desktops and smart devices, along with a wealth of information on those opportunities, Palico gives limited partners, general 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 stay on top of investment opportunities across the globe and across specialties."

Gonzalo Eguiagaray, Arcano Group
Read More

Big PE Funds Are Killing It, So Are Small Funds Dead?

Sep 29, 2017 10:33:48 AM / by Robert Ientile posted in Palico In Focus, V2

0 Comments

Read More

Digital Tips the Scales of Change in Private Equity (Finally!)

Aug 31, 2017 10:25:21 AM / by Robert Ientile posted in Palico In Focus, V2

0 Comments

Read More

Will PE Placement Agents Go the Way of the Rolodex?

Jul 28, 2017 11:12:12 AM / by Robert Ientile posted in Palico In Focus, V2

0 Comments

Read More

Palico and EMPEA Partner to Streamline Emerging Market Commitments

Jul 20, 2017 5:24:50 PM / by Robert Ientile posted in Palico In Focus, V2

0 Comments

Last week, emerging markets association EMPEA and Palico signed a partnership to make the commitment process for PE funds more efficient and affordable for both investors and managers.

Read More