Generating return out of secondary transactions is about working hard to unlock value from unique transactions, says research from Unigestion. And this is contrary to the commonly accepted view in the industry that focusing on discount is not the appropriate way to generate sustainable returns through secondaries transaction. Transactions are unique either because they are less advertised than others (smaller, more private, have to do with one fund rather than ‘block’ transactions) or unique because they involve some kind of complexity which requires the appropriate knowledge, skill, and engineering to execute. Approaching secondaries transactions this way enables investors to expect steadier returns rather than ‘just’ focusing on discounts, it says. In such transactions, buyers need to be able to identify a return potential that the wider market cannot see or is unwilling to pursue. Managers who can discover and release the hidden value in these less obvious and more unique deals allow their investors to benefit from NAV upside through skillful deal-making rather than simply chasing discounts.
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