Blackstone raising fund to target GP-led secondaries deals

Blackstone joins TPG as the latest high-profile GP to raise a separate fund for GP-led secondaries.

If you need more evidence that private equity secondaries has gone mainstream, check this out: Blackstone Group is raising a pool of capital that will target GP-led deals like fund restructurings and single-asset deals.

Blackstone joins TPG as the latest high-profile GPs to raise a separate fund for GP-led secondaries, which differ from the traditional private equity secondaries transaction involving a limited partner selling its stake in a PE fund.

GP-led secondaries are on the rise as firms look for ways to hold certain assets beyond the rigid confines of traditional private equity funds. Evercore found in its recent secondaries market survey that GP-led deals represented more than 50 percent of 2020 deal volume.

Blackstone has had a secondaries group since 2013, when it acquired Strategic Partners from Credit Suisse. The firm has participated in GP-led deals through its global secondaries fund, (the latest of which closed on more than $11 billion in 2019), but the firm saw the opportunity to raise a separate pool of capital just for those types of deals.

It’s not clear how deal flow would break down between the two pools. Blackstone expects to start raising its next global secondaries fund later this year, Jon Gray, Blackstone president, said Wednesday on the firm’s fourth quarter and full-year earnings call. Fund VIII was more than 75 percent deployed, Gray said on the call.

“If you believe in the alternatives mega-trend, secondaries is a powerful way to play it,” Gray said.

Gray explained that as more capital pours into the industry, the market naturally evolves means for liquidity. “Alternatives are growing at high single digits, low double digits across the globe,” Gray said.

The fund is in the market now. It’s not clear how much it is targeting. The fund will be run by the overall Strategic Partners team, though the expectation is one or more individuals will lead the strategy.

Strategic Partners hired Nik Morandi last year to lead the group’s investment activities in Europe, the firm said. Morandi previously led the European secondaries business for the Canada Pension Plan Investment Board.

TPG is out talking to limited partners about its first GP-led fund that could target as much as $2 billion, Buyouts previously reported. TPG’s fledgling secondaries team is led by Michael Woolhouse, who previously led secondaries at CPPIB.

Evercore estimated uncalled capital levels for secondaries at around $113 billion as of December, an increase from $96 billion in December 2019. Fundraising for secondaries should be active this year, with $72 billion of planned capital raising in the next 12 months, according to Evercore’s 2021 secondaries market survey.