ABRY, HIG most sought-after US mid-market secondaries managers

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people-431943_640ABRY Partners and HIG Capital topped a ranking of the 35 most sought-after US mid-market buyout managers in the secondaries market in the Q2 according to Setter Capital. 

According to a list by Toronto-based advisory firm Setter Capital, the private equity duo were joined by Friedman Fleischer & Lowe, Genstar and JLL Partners at the top.

While Weston Presidio, Cressey & Co and KRG made it in the rankings at the bottom of the list.

The report is based on the Setter Liquidity Rating which rates fund families as excellent, very good, good and unrated depending on how sought-after and saleable they are on the secondary market.

It found that the funds of most sought-after manager’s price on average about 9 per cent better than funds of unrated managers, Setter noted.

Those popular funds have typically performed better, with an average internal rate of return of 16 per cent, than those of unrated managers, which have an average IRR of 14 per cent.

The most sought after also raised more money, with their average fund size being $1.5bn compared to $684m for unrated managers.

Additionally, there is significantly more buyer demand for the most sought after managers, with the average number of prime buyers being 25, versus four for the unrated managers.

Setter senior analyst Kristina Kulikova told AltAssets, “Sometimes when there is a lot of competition on certain funds/managers, certain buyers will step aside ‎and say they are less likely to be competitive, since there is likely to be a feeding frenzy.

“On the other hand, you have new buyers looking to the buying interests of the larger fund of funds and secondary funds due to their experience hence seeing which managers are most in demand serves as a helpful guideline.”

Last month, AltAssets reported that Blackstone Capital Partners, Apollo Investment Fund and Bain Capital are the most sought-after US large-cap buyout managers on the secondary market according to the Setter Most Sought After list.

Kulikova added that portfolio rebalancing and reducing the number of GP relationship are still the main motivates for the sellers.

“ We see a lot of Secondary funds (who are typically on the buying end of the spectrum) looking to sell their higher multiple funds where they feel there isn’t much further upward movement for the NAV, despite the remaining term.

“So the way they look at it is : if the GP is projecting a certain NAV that the fund is likely to end up at, and they feel it has already hit that level, it makes sense to sell and not have the money sitting there for the rest of the remaining term since they can re-invest that capital.

“There is also still obviously a manager– relationship consideration, where if the group is no longer planning to re-up with the manager g‎oing forward they may look to sell to clean up relationships that they have.”

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