Stapled secondary transactions provide fund managers with a way to secure primary capital for the next vehicle that it raises from investors purchasing an interest in an existing fund. Preqin’s Secondary Market Monitor online service currently tracks 509 investors that consider buying private equity fund interests on the secondary market, 88 (17%) of which have an interest in taking part in stapled secondaries. Though the appetite for such transactions was low from 2008-2009, in more recent years there has been a notable increase in the number of stapled secondary deals completed. Preqin’s statistics, on the number of investors expressing such an interest, reinforce that there is substantial potential for stapled secondaries. Furthermore, the aforementioned 88 investors have aggregate assets under management of nearly $2.7tn.
These 88 private equity secondary market investors are headquartered around the world, with the largest proportion (48%) based in European countries, such as Switzerland, Denmark and the UK. Forty percent of these investors are headquartered in the US, 6% are based in Asian countries, such as Singapore and China, and the remaining 5% are headquartered in Israel, Mauritius or the United Arab Emirates.
Abu Dhabi Investment Authority is the largest investor in this sample, with $627bn of assets under management. The UAE-based sovereign wealth fund is an active participant on the secondary market, and would consider taking part in stapled secondary transactions as part of its investment strategy. Abu Dhabi Investment Authority specifically looks to purchase interests in mid-market buyout vehicles, and uses the market in order to mitigate the effects of the J-curve.
The second largest investor with an interest in stapled secondary transactions is HVB Group, which has total assets under management of $550bn. The German bank takes an opportunistic approach towards purchasing private equity fund interests on the secondary market, but has a preference for buying stakes in Europe-focused buyout vehicles.