Orlando Bravo: ‘Liquidity is overrated’

The co-founder of tech giant Thoma Bravo has said the the ability to 'get out at every instant' is not as valuable as it may seem.

The fastest growing sub-sector of private markets is based on the premise that the ability to sell is always worth something, according to the founder of tech investment giant Thoma Bravo.

“Liquidity is overrated,” Orlando Bravo, founder and managing partner, wrote in a Tweet on Saturday. “If you have so much conviction in the manager you chose or in the companies that you own a piece of, why would you place so much value in the ability to get out at every instant?”

Liquidity is also often cited as one of the chief barriers preventing more retail capital from accessing private markets.

Whereas institutional investors are more familiar with private asset classes and their longer time horizons, retail investors typically focus on shorter periods and tend to have a greater tendency to want or need liquidity prior to an investment’s natural liquidity timeframe, Jeff Keay, a managing director at HarbourVest Partners, told PEI in September.

“Inevitably there needs to be some mechanism for liquidity for retail investors,” said Keay.

Just over one-fifth of respondents to Private Equity International‘s LP Perspectives 2022 Survey said they planned to sell fund stakes on the secondaries market in the coming year. The figure is down from 27 percent a year ago.

More than one-third of the top 50 firms in the PEI 300 have initiated some kind of liquidity process on their funds to give their LPs the option to cash out while the sponsor retains exposure to assets via so-called continuation funds, according to estimates by PEI and affiliate title Secondaries Investor.

The head of GP-led secondaries at a global advisory firm said: “Think about if your LP, say a pension officer, has gone to their own IC and said, ‘I want to make this investment into KKR,’ and KKR is now telling you, ‘Hey, I can get you three times your money back on one of those first investments and massively de-risk your decision to invest in me.’ LPs really like that.”

Four of the top 10 largest managers, including Blackstone, KKR and TPG, have closed at least one continuation fund. Thoma Bravo has not run continuation fund processes on any of its assets, PEI understands.