Last week it emerged that Canada Pension Plan Investment Board‘s head of secondaries Michael Woolhouse was departing after 13 years with the pension giant. On Monday he joined TPG as a partner charged with leading the buyout giant’s push into the US and European secondaries market.
The match makes sense. Under Woolhouse, CPPIB went from focusing purely on LP interests to backing some of the most creative deals in the market, including a $1 billion fund of funds restructuring with UK asset manager Hermes GPE and the restructuring of three funds managed by Peru’s Enfoca Investments, as reported by sister title Secondaries Investor. The pension has also been a conveyor belt of secondaries talent, producing the nucleus of preferred equity specialist Whitehorse Liquidity Partners and a number of Secondaries Investor Young Guns.
Few general partners have embraced the so-called GP-led secondaries market with the same gusto as TPG. Since 2018, the firm has carried out tender offers on its 2011-vintage growth fund (led by CPPIB, incidentally) and on two of its Asian private equity funds. TPG was working on a $1-billion-plus single-asset secondaries process when the crisis hit. In 2018, it acquired “a significant minority stake” in directs specialist NewQuest Capital Partners in order to take advantage of inefficiencies in the Asian market.
TPG’s history made it a favourite to enter the secondaries market, but many multi-asset managers are feeling a push in that direction (see Secondaries Investor‘s recent stories about Brookfield Asset Management and CVC Capital Partners). GP-led processes are increasingly the preserve of high-quality GPs, and a longer fund life is no longer necessarily indicative of an inability to exit. Why not position yourself to take advantage?
At the same time, declining return expectations are causing asset managers to prioritise fees over capital growth like never before, as is clear among listed firms: “Analysts’ questions on results calls for Carlyle, Blackstone [etc] are all about new fund launches and fee-generating assets under management,” said one Europe-based advisor. Raising a highly diversified, low-risk secondaries fund is one way to go about it.
On the other side of the coin, conditions could be ripe for attracting talent. The secondaries talent pool is limited, placing a high value on those who have the right skillset. We have heard that some mid-level buy-side professionals are looking at their current vintage, sizing up the possible damage from coronavirus and wondering whether a move might prove more profitable in the long run. We haven’t seen the end of this trend.
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