The secondary investment opportunity

Secondary fund investments provide superior investment characteristics. Investors face a reduced blind pool risk through early asset visibility and swift capital deployment as well as benefit from a substantially shortened J-curve effect and early liquidity events.

Transacted secondary market volumes have been constantly high over the past several years and are expected to remain so in the future – mainly driven by regulatory pressure on financial institutions, general acceptance of secondary deals as a portfolio management tool throughout the private equity industry as well as growth of the primary market.

As a rule, secondary prices are cyclical and typically move in parallel with overall GDP development. Appropriate market and entry timing are therefore key in order to achieve successful secondary performance.

The secondary fund investment approach

Akina’s approach towards secondary opportunities is largely unaffected by the overall market volatility in terms of pricing and volumes. Akina leverages its integrated European investment platform and focuses on smaller transactions. These are typically sourced on a purely proprietary basis and therefore remain below the radar of large secondary volume players. Investors benefit from our deep investment experience as well as extensive networks in the European private equity market enabling thorough asset evaluation and swift deal execution. If appropriate, Akina recommends special deal structuring features to help enhance investment performance and meet Akina’s high return targets.

Regional variations within the European private equity secondary landscape are exploited via appropriate deal strategies. In challenging macro environments such as peripheral Europe, for example, high discount deals are available, but the underlying portfolio must be fairly defensive in terms of industry exposure in order to keep a reasonable level of downside protection. In contrast, mature European markets have seen high prices and competition over the recent past, meaning that secondary performance must be achieved via value deals, typically supplemented by structural features like deferred payments, asymmetrical waterfalls or earn-outs.

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