Stapled secondary transactions provide fund managers with a way to secure capital for the next vehicle that it raises from investors purchasing stakes in an existing fund. Preqin’s Secondary Market Monitor online service currently tracks 667 investors who would consider purchasing fund interests on the secondary market, of which 115 would consider taking part in a stapled secondary transaction. These 115 LPs have aggregate assets under management (AUM) of over $2.9tn and therefore represent an important source of capital for fund managers looking to benefit from such a transaction.
Of the 115 investors that would consider participating in a stapled secondary transaction, half are based in Europe, followed by 40% that are based in North America. The remaining 10% of LPs are based in economies outside these regions.
HarbourVest Partners took part in a stapled secondary transaction this year, whereby the private equity fund of funds manager led the restructuring of a number of funds managed by Doughty Hanson Partners. HarbourVest Partners acquired stakes in Doughty Hanson & Co III, Doughty Hanson & Co IV and Doughty Hanson & Co V. The firm then made a commitment of €65mn alongside the transaction to Doughty Hanson Partner’s latest vehicle, Doughty Hanson VI.
The largest investor with an interest in stapled secondary transactions is Abu Dhabi Investment Authority, with $770bn in total AUM. The UAE-based sovereign wealth fund is actively looking to purchase stakes in global buyout funds, and will consider taking part in a stapled secondary transaction.
Pictet Group is the second largest investor with an interest in stapled secondary transactions, with $441bn in total AUM. The bank, based in Switzerland, opportunistically seeks to acquire stakes in Europe and US-focused real estate funds, and has demonstrated a willingness to take part in a stapled secondary transaction.
The third largest investor who would consider taking part in a stapled secondary transaction is HVB Group, with €290bn in total AUM. The German bank opportunistically purchases fund interests on the secondary market, and has an interest in European buyout funds.