Secondaries | Investment Insight
March 30, 2023
The Expanding Opportunities for Sponsor and Secondary Solutions
Today, investors face a unique and challenging macroeconomic environment, defined by tightening monetary and financial conditions, inflation and volatility. Against this uncertain backdrop, we believe that there will be an increased desire for liquidity and that private market secondaries are poised to offer flexible capital and creative solutions to both LPs and GPs.
Veena Isaac | Co-Head of Apollo Sponsor & Secondary Solutions (S3)
Steve Lessar | Co-Head of Apollo Sponsor & Secondary Solutions (S3)
Konnin Tam | Co-Head of Apollo Sponsor & Secondary Solutions (S3)
We believe that flexible, opportunistic, and diversified secondary strategies could be well positioned to capitalize on distress and dislocation to provide investors with excess return per unit of risk. We see a compelling opportunity set for nimble secondaries market investors who can provide a range of tailored investment solutions, particularly in mid-sized secondaries transactions.
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The US economy remains strong with no signs of a major slowdown going into 2025. We see interest rates staying higher for longer on a relative basis (regardless of the Fed’s easing campaign) as inflation remains above target, employment strong, and spending robust.
Innovation has helped to destigmatize GP-led transactions, establishing the practice as a mainstream liquidity management tool for GPs today. In this paper, we explore how GP-led deals can offer concentrated exposure to high-quality managers and assets, compounding the overall advantages of secondary strategies.
With rates still expected to stay “higher for longer,” risk premia in public equities and public fixed income is narrow. In our view, private markets can offer options, especially in private equity secondaries, large corporate direct lending, asset-backed finance, and other areas.
