Secondary Market Background

Over the past ten years, private equity and debt Fund portfolios have been maturing. Accordingly, many Institutional LP's, Financial Service Institutions, Corporate Investors and Family Offices have begun to focus on managing their private equity portfolios on a more strategic and sophisticated basis. This has resulted in the development of new approaches to GP relationship management and has highlighted how both Secondary Transactions of LP Interests and Divestments of Stakes in Private Companies and Co-Investments (Direct Secondaries) have become very useful and accepted tools in achieving strategic objectives such as:

  • Portfolio Management to lower impact of non-performing managers, and sector or geographic overweighting
  • Generating Liquidity
  • Rebalancing of asset allocation models to ease the impact of the Denominator Effect
  • Paring down excess manager relationships to focus on core manager relationships
  • Rebalancing of vintage year weightings to free up capacity for newer vintage year funds
  • Freeing up resources for core strategic goals by seeking new sources of liquidity from a non-strategic Alternative Assets Portfolio
  • Creating administrative efficiency by trimming non-core positions
  • Maximizing portfolio returns with timed divestments
  • Divesting Portfolios for Funds that have reached the end of their term
  • Diversifying holdings that have a disproportionate weighting of investor's net worth concentrated in stakes in illiquid assets

Accordingly, in the current secondary market which:

  • there are currently over 1,000 active potential buy-side participants
  • has grown increasingly complex and global, with dedicated secondary funds, funds of funds, financial institutions, pension funds, endowments and foundations, hedge funds, family offices, and government institutions all interested in potentially buying assets on the secondary market
  • has experienced significant pricing shifts in short periods of time over the past several years as pricing cycles become more compressed
  • Confidentiality and discretion is beneficial

LP's & Institutional investors, whose core competencies lie elsewhere, do not want to take the risk of relying on executing secondary transactions on their own without leveraging the expertise of an advisor - as they have recognized that they do not have the time, bandwidth or relationships to execute the transaction process optimally and generate the best possible pricing and returns with the desired confidentiality.

Azla Advisors meets this need by offering:

with LP advisory services provided by a hands-on, focused group of professionals that have the experience, relationships and the drive to advise clients on the most appropriate secondary market, liquidity and divestment strategies and execute transactions efficiently, confidentially and discreetly with optimal pricing.