What Makes GP-Led Secondaries a Compelling Opportunity Video

Descriptive Transcript

 

0

00:00:04.800 –> 00:00:08.200

A background video of a hydroelectric plant plays on screen with the title “Infrastructure” “ What Makes GP-Led Secondary Transactions a Compelling Opportunity? Presented by Scott Litman, Managing Director, Infrastructure Investments” overlayed on the screen. There is a white GCM Grosvenor logo in the bottom left corner of the screen.

Scott Litman: So what’s different about a GP-led single

 

 

1

00:00:07.200 –> 00:00:10.400

Scott Litman: asset secondary? Typically, what

 

 

2

00:00:10.400 –> 00:00:13.300

The video fades to a front view of Scott standing in an office talking.

Scott Litman: you have in a GP single asset

 

 

3

00:00:13.300 –> 00:00:17.300

Over the video of Scott, a blue box with white text “Single asset secondary transactions allow GPs and certain LPs to extend ownership in their strongest assets, while providing other LPs with an option to take liquidity” appears.

Scott Litman: secondary is the GP is making a decision that

 

 

4

00:00:16.300 –> 00:00:19.400

Scott Litman: they’d like to hold an asset for longer

 

 

5

00:00:19.400 –> 00:00:22.900

Scott Litman: because they see interesting and compelling opportunities

 

 

6

00:00:22.900 –> 00:00:25.500

Scott Litman: to maximize value that likely

 

 

7

00:00:25.500 –> 00:00:28.700

The text box fades away.

Scott Litman: will go beyond the end of the life of the

 

 

8

00:00:28.700 –> 00:00:30.400

Scott Litman: fund in which that asset sits.

 

 

9

00:00:31.200 –> 00:00:34.800

Scott Litman: Now some other features of these opportunities may

 

 

10

00:00:34.800 –> 00:00:37.200

The video of Scott fades to an aerial video of a busy cargo port with shipping containers lined up.

Scott Litman: be, and this is different from one to

 

 

11

00:00:37.200 –> 00:00:40.700

The video changes to an aerial view of a metal structure. The camera appears to start at the bottom between the building structures and pan upwards while looking down at the ground the whole time.

Scott Litman: the next, but it may be that these opportunities are

 

 

12

00:00:40.700 –> 00:00:44.300

Scott Litman: being pulled out of funds that are underperforming but

 

 

13

00:00:43.300 –> 00:00:46.400

The video changes to a man and a woman wearing hard hats and green work vests looking up and pointing at powerlines overhead.

Scott Litman: the assets themselves are typically

 

 

14

00:00:46.400 –> 00:00:49.400                 

The video changes back to Scott talking in the office.

Scott Litman: marquee assets that the GP has high

 

 

15

00:00:49.400 –> 00:00:52.800

Scott Litman: conviction in and that’s why this opportunity is really interesting.

 

 

16

00:00:53.600 –> 00:00:56.300

Scott Litman: So that kind of will set the table as to

 

 

17

00:00:56.300 –> 00:00:59.400

Scott Litman: what we’re talking about. We at GCM

 

 

18

00:00:59.400 –> 00:01:02.100

Scott Litman: think of these opportunities largely as very

 

 

19

00:01:02.100 –> 00:01:06.300

Scott Litman: close cousins of the co-invest which really comprises the

 

 

20

00:01:05.300 –> 00:01:08.200

Scott Litman: bulk of what we do and where we think

 

 

21

00:01:08.200 –> 00:01:10.800

Scott Litman: we’ve got tremendous expertise in the space.

 

 

22

00:01:12.100 –> 00:01:16.000

The video fades into a navy blue background with “Benefits of Single Asset Secondary Investments” appearing in white text on the top center of the screen.

Scott Litman: What makes them similar and what we are interested in here is

 

 

23

00:01:15.200 –> 00:01:19.200

A blue icon of a triangle with an exclamation point in the middle and white text stating “No blind pool risk” appears under the title on the screen. At the bottom of the screen, “Unless apparent from all context, all statements herein represent GCM Grosvenor’s opinion. No assurance can be given that any investment will achieve it’s objectives or avoid losses” is visible in white text at the bottom of the screen.

Scott Litman: that these opportunities don’t have any blind pool

 

 

24

00:01:19.200 –> 00:01:22.200

Scott Litman: risk, you’re not just underwriting a sponsor, there is

 

 

25

00:01:22.200 –> 00:01:25.900

Scott Litman: an asset. There’s a business plan. There are financials that

 

 

26

00:01:25.900 –> 00:01:28.100

Scott Litman: we can sink our teeth into that we can

 

 

27

00:01:28.100 –> 00:01:31.400

Scott Litman: do our typical diligence of and we can form

 

 

28

00:01:31.400 –> 00:01:34.600

The video changes back to Scott talking.

Scott Litman: our own view of valuation on

 

 

29

00:01:34.600 –> 00:01:37.600

Scott Litman: and that’s really interesting and it allows us to

 

 

30

00:01:37.600 –> 00:01:39.900

Scott Litman: get a much better picture of the opportunity.

 

 

31

00:01:40.800 –> 00:01:43.400

Scott Litman: Secondly, I mentioned that these are assets

 

 

32

00:01:43.400 –> 00:01:46.600

Scott Litman: that are sitting in the funds of a GP

 

 

33

00:01:46.600 –> 00:01:49.100

Scott Litman: that may be getting towards the end of

 

 

34

00:01:49.100 –> 00:01:52.400

The video changes back to the previous blue screen and under the blind pool risk text, a blue icon of a shield with a checkmark in the middle and white text stating “GP in a unique position to understand asset” appears on screen.

Scott Litman: their life. Why is that relevant? Because it

 

 

35

00:01:52.400 –> 00:01:55.300

Scott Litman: means that the GP has very good familiarity with

 

 

36

00:01:55.300 –> 00:01:56.100

Scott Litman: the asset.

 

 

37

00:01:56.600 –> 00:01:59.000

Scott Litman: So the GP may have owned this asset for a year,

 

 

38

00:01:59.400 –> 00:02:02.200

Scott Litman: two years, five years, seven years, and now they want to own

 

 

39

00:02:02.200 –> 00:02:05.400

The video changes back to Scott talking.

Scott Litman: it for longer. So they are in our opinion

 

 

40

00:02:05.400 –> 00:02:08.800

Scott Litman: very well positioned to understand

 

 

41

00:02:08.800 –> 00:02:11.100

Scott Litman: what the value proposition is on the

 

 

42

00:02:11.100 –> 00:02:14.900

Scott Litman: back end even more so than they are when

 

 

43

00:02:14.900 –> 00:02:17.900

Scott Litman: they’re typically buying an asset from a third party because in

 

 

44

00:02:17.900 –> 00:02:20.400

Scott Litman: this case they happen to be buying and selling there on both

 

 

45

00:02:20.400 –> 00:02:21.300

Scott Litman: sides of the transaction.

 

 

46

00:02:21.900 –> 00:02:24.200

Scott Litman: So, we find that quite compelling and then we

 

 

47

00:02:24.200 –> 00:02:26.900

Scott Litman: have a lot of confidence in the GPs we work with on that basis.

 

 

48

00:02:27.800 –> 00:02:28.100

Scott Litman: Third,

 

 

49

00:02:29.100 –> 00:02:32.100

The video changes back to the blue screen and under the GP text, a blue icon of a network of people appears with white text next to it stating “Strong GP alignment”.

Scott Litman: these opportunities, because we come in as a buyer and in

 

 

50

00:02:32.100 –> 00:02:35.700

Scott Litman: many cases we come in as a lead buyer and we’ll talk a little more about that, we

 

 

51

00:02:35.700 –> 00:02:38.300

Scott Litman: think there’s an opportunity for strong alignment with

 

 

52

00:02:38.300 –> 00:02:41.700

Scott Litman: the GP and we can help negotiate those terms.

 

 

53

00:02:41.700 –> 00:02:44.300

Under the previous text, a blue piggybank icon appears with white text stating “Opportunity to roll GP economics into a continuation structure.”

Scott Litman: And fourth, when we’re looking

 

 

54

00:02:44.300 –> 00:02:47.400

Scott Litman: at these opportunities in the event that the GP is looking

 

 

55

00:02:47.400 –> 00:02:48.500

Scott Litman: for an incentive,

 

 

56

00:02:49.300 –> 00:02:52.600

Scott Litman: we can kind of build that into our model and kind

 

 

57

00:02:52.600 –> 00:02:55.500

Scott Litman: of build it into the purchase price, which means we may buy at a

 

 

58

00:02:55.500 –> 00:02:58.200

Scott Litman: discount in order to embed whatever the GP is going

 

 

59

00:02:58.200 –> 00:02:59.800

Scott Litman: to receive on the back end. So

 

 

60

00:03:00.900 –> 00:03:03.700

Scott Litman: these are some of the reasons that we find these opportunities

 

61

 

00:03:03.700 –> 00:03:04.500

Scott Litman: quite compelling.

 

 

62

00:03:05.300 –> 00:03:08.400

The video changes back to Scott talking.

Scott Litman: We think this is a market that’s growing. We think

 

 

63

00:03:08.400 –> 00:03:11.500

A blue text box appears on the bottom of the screen with white text stating “We believe this could represent ~$60B of annual infrastructure single asset secondary transaction volume in 3-5 years.”

Scott Litman: maybe north of $60 billion in total opportunity

 

 

64

00:03:11.500 –> 00:03:14.000

Scott Litman: value and infrastructure alone over the next three to five

 

 

65

00:03:14.300 –> 00:03:17.400

The text box fades away.

Scott Litman: years and to help you kind of think about where that number

 

 

66

00:03:17.400 –> 00:03:20.500

The video changes to a navy blue screen with “Market Supports Continued Secondaries Growth” in white text as the title at the top. On the left side under the title there are two charts on top of each other. The top chart is a bar chart showing light blue bars with the x axis showing values 2019, 2020, 2021, and 2022. The title is “Total Secondary Market Volume Capital: H1 2022 Secondary Market Volume.” The values are $85B, $60B, $50B H1 2021 with $85B predicted for H2 2021 for a total of $135B, and $53B H1 2022 with $62B predicted for H2 2022 for a total of $115B forecasted for FY 2022. The second chart is titled “Secondary Focused Capital” and states $137B of dedicated secondary dry powder (not including leverage, as of June 30, 2022) and $192B total secondary capital available with leverage. On the right side of the screen there is a single pie chart titled with a legend underneath “Increasing Percentage of Single Asset Deals: Type of GP-Led Transactions in H1 2022 (split by transaction value, purchase price + unfunded, per respondent. Definitions: continuation funds; restructuring/asset sales. Asset strip sales; acquiring a strip of a portfolio into a new vehicle.) The pie chart shows a total of ~$19B of transaction volume and the legend dictates it’s split by 51% single asset continuation funds, 40% multi asset continuation funds, 5% tender offers, 3% asset strip sales, and 1% direct sale. Data for all charts is sourced from Campbell Lutyens 1H 2022 Secondary Market Overview.

Scott Litman: is, I’m going to give you a broad picture of the market and

 

 

67

00:03:20.500 –> 00:03:22.300

Scott Litman: then we’ll narrow in on the GP space.

 

 

68

00:03:23.200 –> 00:03:26.000

Scott Litman: So here on this slide lots of graphs lots of

 

 

69

00:03:26.300 –> 00:03:29.200

The slide zooms in on the “Total Secondary Market Volume/Capital” bar chart. The other charts are no longer visible on screen.

Scott Litman: numbers, let me help you unpack this. What you’re seeing is how

 

 

70

00:03:29.200 –> 00:03:33.200

Scott Litman: this market has evolved. So 2019, $85 billion

 

 

71

00:03:33.200 –> 00:03:36.700

Scott Litman: of secondaries across the market. That includes PE, real

 

 

72

00:03:36.700 –> 00:03:39.300

Scott Litman: estate, infrastructure, everything that’s gone on the

 

 

73

00:03:39.300 –> 00:03:42.400

Scott Litman: market. It also includes LP- and GP-led deals.

 

 

74

00:03:42.400 –> 00:03:45.500

Scott Litman: So this is the market, you see that market come in in 2020

 

 

75

00:03:45.500 –> 00:03:48.600

Scott Litman: that’s COVID related, it’s pandemic related, activity

 

 

76

00:03:48.600 –> 00:03:51.900

Scott Litman: was down and then you see a really nice pop and

 

 

77

00:03:51.900 –> 00:03:54.500

Scott Litman: growth in ’21 and ’22 and that’s

 

 

78

00:03:54.500 –> 00:03:57.400

Scott Litman: what we expect to continue. That’s the broad

 

 

79

00:03:57.400 –> 00:03:57.700

Scott Litman: market.

 

 

80

00:03:58.600 –> 00:04:01.600

Scott Litman: Where’s the capital that’s chasing these opportunities? Well

 

 

81

00:04:01.600 –> 00:04:04.500

The focus switches to the “Secondary Focused Capital” chart.

Scott Litman: that you see on the bottom left of the page.

 

 

82

00:04:04.500 –> 00:04:07.500

Scott Litman: $137 billion of dedicated dry

 

 

83

00:04:07.500 –> 00:04:10.300

Scott Litman: powder with nearly $200 billion

 

 

84

00:04:10.300 –> 00:04:13.300

Scott Litman: of dry powder when you think about the leverage that

 

 

85

00:04:13.300 –> 00:04:17.400

Scott Litman: can be added to this transaction. So there’s a lot of people with capacity

 

 

86

00:04:16.400 –> 00:04:19.300

Scott Litman: to chase these deals. Now, let’s

 

 

87

00:04:19.300 –> 00:04:22.800

The focus changes to the “Increasing Percentage of Single Asset Deals” pie chart.

Scott Litman: kind of narrow the lens a little bit $19 billion

 

 

88

00:04:22.800 –> 00:04:25.600

Scott Litman: of transaction volume in GP-led

 

 

89

00:04:25.600 –> 00:04:28.500

Scott Litman: secondaries. So it’s still a very small piece

 

 

90

00:04:28.500 –> 00:04:31.900

Scott Litman: of the overall market, but it’s growing quickly

 

 

91

00:04:31.900 –> 00:04:34.700

Scott Litman: and inside that $19 billion

 

 

92

00:04:34.700 –> 00:04:37.900

Scott Litman: for the first time in the

 

 

93

00:04:37.900 –> 00:04:40.900

Scott Litman: history that we’ve been tracking over the last four, five,

 

 

94

00:04:40.900 –> 00:04:41.200

Scott Litman: six years,

 

 

95

00:04:42.400 –> 00:04:45.500

Scott Litman: single asset continuation funds represent more than

 

 

96

00:04:45.500 –> 00:04:46.900

Scott Litman: half of all that volume.

 

 

97

00:04:47.500 –> 00:04:50.500           

The video changes back to Scott talking.

Scott Litman: And this is the opportunity set that we see growing and

 

 

98

00:04:50.500 –> 00:04:53.600

Scott Litman: that we think is going to be quite compelling. So more

 

 

99

00:04:53.600 –> 00:04:56.400

Scott Litman: to come in ’23 in ’24.

 

 

100

00:04:56.400 –> 00:04:59.200

Scott Litman: and in the years following that and we think this is

 

 

101

00:04:59.200 –> 00:05:02.400

Scott Litman: going to be something that we’re going to track closely and be

 

 

102

00:05:02.400 –> 00:05:05.200

Scott Litman: able to execute on time and again over the course of

 

 

103

00:05:05.200 –> 00:05:08.800

The video changes to an up close of a digital screen building several charts. A blue box with white text stating “As GPs come to market looking for these opportunities, we tend to not only be an early call, but we often are getting phone calls in advance of these types of opportunities being in the market” appears on the bottom of the screen.

Scott Litman: the next three or four years. As this trend continues, as

 

 

104

00:05:08.800 –> 00:05:12.100

Scott Litman: GPs come to market looking for these opportunities, we

 

 

105

00:05:11.100 –> 00:05:14.300

The video changes to an aerial view of a bridge with cars driving over water.

Scott Litman: tend to not only be an early call but

 

 

106

00:05:14.300 –> 00:05:17.600

The video changes back to Scott talking and the text disappears.

Scott Litman: we often are getting phone calls in advance

 

 

107

00:05:17.600 –> 00:05:20.200

Scott Litman: of these types of opportunities being in the

 

 

108

00:05:20.200 –> 00:05:24.000

market to take our temperature on interest, on pricing,

 

 

109

00:05:23.500 –> 00:05:26.200

Scott Litman: on terms because we’ve done

 

 

110

00:05:26.200 –> 00:05:27.000

Scott Litman: so much of this.

 

 

111

00:05:27.900 –> 00:05:28.000

The video changes to an aerial view of a windfarm with rows of windmills blowing.

Scott Litman: So,

 

 

112

00:05:29.300 –> 00:05:32.700

The video changes to an up close of one windmill blowing.

Scott Litman: as I kind of wrap up here today I hope that you guys have started

 

 

113

00:05:32.700 –> 00:05:35.600

Scott Litman: to see what we find so compelling in the

 

 

114

00:05:35.600 –> 00:05:38.600

The video changes to a plane landing on a runway during a cloudy sunset.

Scott Litman: single asset space and infrastructure. We’d love

 

 

115

00:05:38.600 –> 00:05:41.300

Scott Litman: to do more of these deals and we’d love to do all of

 

 

116

00:05:41.300 –> 00:05:44.400

The video fades back to Scott talking.

Scott Litman: this with you all and should this be an opportunity that’s

 

 

117

00:05:44.400 –> 00:05:47.300

Scott Litman: compelling for you, we’d love to have you reach out

 

 

118

00:05:47.300 –> 00:05:50.100

Scott Litman: to us, and we love to take this conversation further with you into the future.

 

 

119

00:05:50.100 –> 00:05:52.200

The video ends with an over-the-wing view from inside an airplane as the plane taxies with a glowing sun around it. “GCM Grosvenor Infrastructure Platform” appears in white text at the top of the screen for a title. “2005 – first year of investing”, “2,535+ deals sourced”, “160+ deals”, and “$11.1B assets under management” appear in white text under the title. At the bottom of the screen, a footnote appears stating “AUM as of December 31, 2022. Infrastructure investments data as of September 30, 2022. Deal count methodology changed in 2013. As a result, deal flow count for years prior to 2013 are an approximate count, updated annually. Employee data as of October 1, 2022. No assurance can be given that any investment will achieve its objectives or avoid losses. Past performance is not necessarily indicative of future results.”

Scott Litman: Thanks so much.

Scroll to Top

Absolute Return Strategies

We offer clients a broad range of tailored solutions across strategies, including multi-strategy, macro, relative value, long/short equity, quantitative strategies, and opportunistic credit. Levaraging our large scale and presence in the industry, we are able to offer clients preferntial exposure to hard-to-access managers and seek to obtain terms that can drive economic and structural advantages.