Investors looking to gain exposure to the secondary market may also consider doing so through early secondaries, which involves purchasing secondary interests in funds that are almost completely unfunded. A significant 74% of secondary market buyers spoken to by Preqin would consider early secondaries opportunities. Of the buyers looking to invest in early secondaries, just over half (51%) are private equity fund of funds managers. Fund of funds managers recognize that LPs are keen to access the secondary market so are inclined to allocate a portion of their vehicles to such investments. Of the non-traditional secondary market buyers, insurance companies rank the highest of all buyers looking to access the early secondary market, representing 9% of the total.
Institutional investors can gain exposure to early secondaries through funds of funds specifically focused on such investments as an alternative to participating in transactions directly. One active manager in the early secondaries market is Goldman Sachs Private Equity Group. It is currently seeking early secondaries opportunities through its $400mn Goldman Sachs Early Secondaries Fund. The vehicle purchases limited partnership interests in funds that are less than 50% drawn down, but focuses predominantly on funds which are 10-20% drawn down.