Interviewed by AltAssets, Greenpark's Daniel Green commented on the increased volume of deal flow in the secondaries market seen in H1 09 and the actual number of transactions completed, which was low. This was the result of low pricing levels by buyers, in the light of the perceived level of risk at that time. Only extremely liquidity-motivated sellers were able to accept this. Such sellers may not have received distributions, may be over-committed and in some cases highly leveraged. When the capital calls come in, they are faced with two choices: they can either default or sell. Greenpark is receiving calls from General Partners from across the industry who have Limited Partners interested in a secondaries sale and is expecting there to be an increased level of activity in the second half of the year.
A lot of the current deal flow includes commitments with a large proportion of unfunded - it may be deemed to be a secondary with as little as 20% funded. Most secondary firms, like Greenpark, would only be interested in funds that are 50, 60 or 70% drawn. However, it is expected that deal flow over the next 12 to 24 months should be extremely attractive. Dedicated secondaries teams have the expertise and rigour to transact effectively as opposed to firms approaching deals on an ad hoc basis, which has its risks. A lot of the market is relatively underserved and, with secondary transactions becoming an evermore accepted practice, there is still plenty of opportunity out there.
To read the full interview, please visit: http://altassets.com/private-equity-features/article/nz16196.html