“Fundfire: Secondaries Market Specialist Managers Gain Ground” by Tom Stabile featuring Shawn Schestag

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A maturing and increasingly competitive market to buy and sell limited partner stakes in private equity funds is pushing many managers that acquire these secondary positions to develop a particular edge in the sector – and pitch themselves more narrowly as specialists to their own investors.


Indeed, managers across the sector now are seeking more creative ways to invest and relying more on special skill sets to execute, putting the generalist, “buy anything” days of the market behind, says Shawn Schestag, head of secondaries at Sixpoint Partners, a placement agent firm.

“As the market matures, [with more] kinds of deal flow, we’ve seen a stratification of strategies, and [managers] developing an expertise or focus around certain types of transactions or certain types of assets,” he says.

The market may yet see more activity, with 40 managers in the market seeking $36 billion in capital, up from 32 funds seeking $28 billion at the start of last year, according to Preqin.

All of that may further push managers to differentiate themselves, Schestag says.

“Firms realize specialization makes you a better investor, and it also helps for differentiating yourself in the fundraising market,” he says.

The flavors of investing for these managers are taking many forms. One big fault line is size – some managers are concentrating on executing very large deals where a seller, such as a big bank, is offloading a large portfolio of private fund stakes. Others are sharpshooters that will buy fund holdings one by one, relying on their underwriting expertise and relationships with sellers, says Kevin Campbell, portfolio manager for private markets at DuPont Capital Management, a $2 billion private equity fund of funds.

In other cases, managers are stratifying by risk, pooling to get lower-returning stakes or groups of holdings with higher-risk equity potential, Schestag says.

Some managers are targeting stakes by their vintage year, specializing in the growing number of private equity funds that were supposed to have wound down years ago but now are entering their 15th or 20th years still holding legacy assets, he says.