Private Equity Secondaries
Private Equity Secondaries

Private Equity Secondaries

 
 
 
Summary

Provides exposure to private equity opportunities acquired in the secondary market.  Seeks diversification across managers, strategies, regions, industries and vintage years.

 
 
Investment Approach
Philosophy

Investing in private equity secondaries can serve as an effective way to start or enhance a private equity program. Attractive features of private equity secondaries may include faster capital draw down and cash flow realization relative to primary private equity commitments, greater visibility into underlying holdings, access to funds from prior vintage years and lower expenses due to the avoidance of most fees paid by the original limited partner up until the time their interests are purchased.  

The team seeks to capture value in the secondary markets in a number of ways. First, by targeting transactions that attract less competition from traditional purchasers of secondary interests. Second, by acquiring assets at sizable discounts to estimated fair market value. Third, by seeking to acquire interests in mature funds to minimize blind pool risk. Finally, by applying equal weight to manager quality and deal economics.

 
Differentiators
Experienced, purpose-built team

Dedicated private equity secondaries team with comprehensive due diligence capabilities and specialized analytical skills. 

Strategic focus on off-market transactions

Well-developed sourcing network enhanced by Morgan Stanley's extensive global footprint and market presence.

A partner of choice

Private equity general partners view the team as an attractive replacement partner given our ability to commit primary and co-investment capital through our private equity fund of funds programs. 

 
 
 
Investment Process
1
Sourcing

Leverage extensive relationships with private equity general partners, intermediaries and other market participants to access off-market deal flow.

2
Screening

Review the transaction for "interest in concept." Assess portfolio quality, valuation and deal dynamics. Collect relevant financial data. 

3
Detailed Analysis

Rigorous quantitative and qualitative due diligence to assess the existence of embedded value in the secondary interest, the assumptions underlying the general partner's assessment of current and future value, evidence that the value drivers for key assets are sustainable, possibility of near-term liquidity and overall return expectations for the investment.

4
Negotiation and Pricing

Engagement with the seller to determine if a transaction can be completed at a price the team finds attractive. Employment of different bidding strategies based upon the bidding process and competitive dynamics.

5
Confirmatory Due Diligence and Approval

Follow-up calls with general partners and management teams. Targeted reference checks and visits with key portfolio companies. Legal review and Investment Committee review and approval.

 
 
Portfolio Managers
Head of the AIP Private Markets Team
29 years industry experience
Managing Director
28 years industry experience
Executive Director
15 years industry experience
Executive Director
14 years industry experience
 
 
 
 

Team members may change from time to time.

Alternative investments are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are suitable only for long-term investors willing to forego liquidity and put capital at risk for an indefinite period of time. Alternative investments are typically highly illiquid – there is no secondary market for private funds, and there may be restrictions on redemptions or assigning or otherwise transferring investments into private funds. Alternative investment funds often engage in leverage and other speculative practices that may increase volatility and risk of loss. Alternative investments typically have higher fees and expenses than other investment vehicles, and such fees and expenses will lower returns achieved by investors.

No investment should be made without proper consideration of the risks and advice from your tax, accounting, legal or other advisors as you deem

This communication is only intended for and will be only distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations. This is prepared for sophisticated investors who are capable of understanding the risks associated with the investments described herein and may not be appropriate for you.  The information presented represents how the portfolio management team generally implements its investment process under normal market conditions.

All information provided has been prepared solely for information purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.  There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. 

A separately managed account may not be suitable for all investors. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. A minimum asset level is required. For important information about the investment manager, please refer to Form ADV Part 2.

Any views and opinions provided are those of the portfolio management team and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring. The views expressed do not reflect the opinions of all portfolio managers at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

Diversification does not protect you against a loss in a particular market; however it allows you to spread that risk across various asset classes.  Past performance is no guarantee of future results.

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