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| 1 minute read

Unlocking Potential: The Power of Secondaries in Evergreen Private Equity

Focusing on secondaries holds the potential to significantly elevate the performance of emerging open-end private equity funds. These funds offer rapid exposure to diverse private company portfolios with adaptable allocation adjustments, yet transaction complexities have hindered their growth. The integration of secondary funds provides a strategic solution that not only addresses these challenges but also offers significant benefits for both fund managers and investors.

By leveraging secondary transactions as a foundation, this approach streamlines portfolio-building, expediting diversification and offering improved insight into asset quality. Secondary funds also introduce liquidity that complements the open-end structure well, unlike traditional models with restrictive lockup periods. Moreover, secondary funds can manage cash drag efficiently by redirecting capital towards existing assets, ensuring continuous deal origination and more effective capital deployment.

However, a cautious approach is necessary due to valuation risks tied to secondary funds, which might favor existing investors. Prioritizing value creation through growth rather than discounts becomes essential. Ultimately, integrating secondary funds into evergreen private equity models enhances their appeal, significantly shortening the portfolio-building timeline and making the benefits of flexibility, liquidity, and diversification more accessible to a broader range of investors. This strategic fusion stands as a robust approach in navigating the evolving private equity landscape.

...secondaries as the core building block for new open-end private equity funds. An initial focus on secondaries creates a win-win scenario that delivers strong advantages to both GPs and LPs.


private markets, private equity, evergreen investments, sustainable investments, secondaries, secondary investments

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