Preqin’s Secondary Market Monitor currently tracks 691 firms that are considering buying private equity fund interests on the secondary market. Of these firms, 110 (16%) are considering purchasing stakes in distressed debt funds as part of their secondary market strategy.
These LPs possess assets under management totalling $1.3tn and represent a wide spectrum of investor types including private equity fund of funds managers (43%), public pension funds (12%), secondary fund of funds managers (10%) and family offices (9%).
Given that such a significant proportion of the potential buyers of distressed debt interests are private equity fund of funds managers, it is not altogether surprising that the three largest – according to the size of their private equity exposure – are all of this investor type.
The largest of these potential buyers is Goldman Sachs AIMS Private Equity, which manages $43bn worth of private equity assets. The firm’s latest dedicated secondaries vehicle, Vintage Fund VI, held a final close on $5.5bn in November 2013 and seeks to acquire secondary stakes in distressed debt vehicles as part of a broader strategy that encompasses all fund types and geographies.
HarbourVest Partners has the second largest private equity assets under management of firms considering acquiring distressed debt fund interests, with its allocation standing at $37bn. The firm actively makes primary investments within the private equity debt market and complements that activity by purchasing secondary distressed debt interests in funds managed by GPs that have proven track records.
With private equity assets under management of $32bn, Hamilton Lane is the third largest firm that looks to acquire distressed debt interests via the secondary market. The private equity fund of funds manager is an opportunistic buyer of fund interests, and considers purchasing distressed debt fund interests along with stakes in a variety of other vehicle types, including buyout and venture capital.