Once upon a time, in the jargon of private equity, a “secondary” would have meant one master of the universe selling to another. Now, it could easily refer to a buyout fund flogging assets to itself.
In the twilight years of the pre-crisis credit boom, the growth of secondary buyouts prompted concerns about dwindling investment opportunities, ailing returns and valuations detached from the strictures of public markets.
As another cycle falters — one where ultra-low interest rates facilitated debt-fuelled deals and sucked money into ever-larger funds — the emergence of so-called GP-led secondaries where a group effectively sells to itself raises similar questions. It is presented as a win-win for private equity shops, known as general partners, and their investors. It won’t be.