Pathways - August 2022
*For investment professional and institutional investor use only. Not for use with the general public.
Secondaries investors often gain access to already operating assets, which offers an opportunity to mitigate the J-curve effect partially or fully.
Secondary funds offer an opportunity to create a highly diversified portfolio by manager, vintage, geography, and strategy.
Secondaries investors tend to know which assets they are acquiring, which may enhance visibility and reduce the blind pool risk.
Infrastructure secondaries’ assets under management could reach between $US50 billion and $US67 billion in 2025, up from $US18.6 billion1 in 2021.
As the secondary market expands, it often acts as a liquidity provider to limited partners and gives greater flexibility to general partners.
1Based on Preqin database, data as of September 2021.
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A J Curve represents the tendency of private equity funds to post negative returns in the initial years and then post increasing returns in later years when the investments mature. The negative returns at the onset of investments may result from investment costs, management fees, an investment portfolio that is yet to mature, and underperforming portfolios that are written off in their early days.
A blind pool, also known as "blank check underwriting" or a "blank check offering," is a direct participation program or limited partnership that lacks a stated investment goal for the funds that are raised from investors.
Investment strategies that hold securities issued by companies principally engaged in the infrastructure industry have greater exposure to the potential adverse economic, regulatory, political, and other changes affecting such entities. Infrastructure companies are subject risks including increased costs associated with capital construction programs and environmental regulations, surplus capacity, increased competition, availability of fuel at reasonable prices, energy conservation policies, difficulty in raising capital, and increased susceptibility to terrorist acts or political actions.
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