This asset class has been growing at 20% a year for the last 5 years

EDITED TRANSCRIPT

Barry, as someone who has been investing in this space for 25 years, how does this environment compare to past cycles?

I think from a cycle standpoint, as we look at it today, we see a lot of similarities to the Global Financial Crisis [GFC]. We are seeing forced sellers in this market as opposed to just opportunistic sellers. We are seeing sellers today selling high-quality assets where historically, we've seen periods when the secondary market has contracted and when the quality of the assets was not really in the same positioning as we are today. 

I think, as we look at the overall market, what is most attractive is the growth in the market compared to the available capital or, said differently, the ability to be highly selective. 

As we look at the market from today going forward, we see growth, we see opportunity and we see the ability to buy high-quality assets at competitive prices.

It's interesting. COVID was a period in time where I think if we went back to February/March 2020, we would've suggested that this was going to be part of the golden age of secondary private equity, the ability to have forced sellers heavily distressed sellers. 

We still see force in distressed sellers, but we didn't see it to the magnitude that we anticipated. What it did do, is it elongated the time between fundraising because you went through a period of time when markets just froze up. So what did that mean? That meant that distribution slowed down in certain cases and contributions increased. And what did that mean for investors? That meant that they needed to seek liquidity, and we believe one of the best ways to seek liquidity in the private markets is through secondaries. 

Managers didn't have the capital to distribute back to the investors, but they were able to be synthetically created using the secondary market.

We would suggest that irrespective of the market cycles, that is, in general, we believe it is a good time to invest in secondaries when there are opportunities for sellers and distressed sellers. We believe it's a great buying opportunity when distributions continue to grow from underlying sponsors and it's a great period for liquidity. 

The challenging time in secondaries remains when it's an attractive time to invest but an unattractive time to raise capital. 

In the market today, with the shifting from the traditional drawdown funds to the perpetual funds being less concerned about having to raise money every two and a half or three years, we do believe that we can call it the golden age of private equity secondaries. It's not a specific time: it's not a day we would pinpoint, but we would suggest it is an attractive time to invest in secondaries.