Secondaries: The importance of being boring

The funny thing about Ardian is that it doesn't consider itself the biggest player in the secondaries market.

Despite being the top fundraiser of the last five years in sister publication Secondaries Investor's 2016 Si 30 ranking and amassing the largest-ever pool of dedicated capital with its latest fund, the firm remains humble about its place in the market.

“Some people are very good at being a bit more exotic. We are boring,” Benoît Verbrugghe, head of Ardian US, says. “We want to buy well-known assets where you have quality and where you can have visibility. The world is a little bit weird today.”

And Verbrugghe has the experience to put 'a little weird' in context – he references Brexit, volatility and exchange rates. He has been at the Paris-headquartered AXA spin-out for 17 of its 20 years. He started as an intern and rose through the ranks to become head of the firm's US operations in 2010. 

Now, he's sitting on the biggest pool of capital ever raised for secondaries, as Ardian's ASF Fund VII includes $10.8 billion for the strategy. The fund is 25 percent invested through eight deals, according to Verbrugghe, who says the firm plans to execute at least another 12 transactions from the fund.

That's against a background of falling deal volume, which is expected to drop below $40 billion for 2016, but that doesn't worry Verbrugghe: Ardian is in discussions with at least six sellers on deals each worth $1 billion or more. 

He says its ability to win such large transactions is due to three factors: its database of fund information, the way it executes transactions and its track record with spin-outs.

“When you sell a portfolio of 200 interests, what you want to get is execution,” Verbrugghe says. Sellers need to be confident a buyer can underwrite a deal, and Ardian can do that by relying on the information in its proprietary database.

While the firm hasn't participated in any GP-led restructurings as a buyer, it has sold limited partnership stakes in funds undergoing restructurings, although the experience was far from pleasurable.

“At the beginning, clearly we were not happy because the process was not transparent, it was not well organised,” he says. Those deals were ultimately successful for the firm, although Verbrugghe declines to comment on details.

He is also phlegmatic about the HarbourVest deal with SVG, in which the Boston-based firm acquired the listed vehicle's portfolio. While some market sources argue it ushers in a new era of hostile deals, he sees it more as business as usual.

“It's one transaction among many transactions,” he says. “It's like every transaction in the world. You have a buyer, you have a seller, you have a negotiation. Sometimes you have a fight between the two. Is it aggressive or is it business as usual? I don't know.”

Ardian did look at taking Conversus Capital private, in a deal that HarbourVest ultimately made in 2012, but for now, it is comfortable with deals it knows it can execute well.

It's not difficult to win a transaction, you just have to put the best price on the table and you win,” Verbrugghe says. “You have to stay professional and say, at this price, I'm out. If one day there is a downturn – and one day it will happen – you have to make sure the portfolio you build over time will go through the crisis without any issues.”