Schroders to spend US$1b a year on secondary private equity

SCHRODERS plans to double the amount of money it invests in pre-existing private equity deals to around US$1 billion a year, seeking to take advantage of a growing trend for buyout managers holding onto businesses for longer.

The London-listed firm is focused on general partner-led secondaries deals. Usually a buyout firm, also known as a general partner, needs to sell its portfolio companies after a set period and return money to its investors. In secondaries deals, Schroders replaces investors who want to cash out – giving the buyout firm more time to improve the business’ valuation, all the while generating fees. 

“There is a lot of opportunity here,” said Christiaan van der Kam, head of secondaries at Schroders Capital, the US$939 billion investment group’s private assets platform. “There are fewer active investors in the GP-led market today versus last year given current market challenges. Furthermore, deals are being repriced downward and buy-side terms are improving.”

Van der Kam said the firm’s sweet spot is small or mid-market deals. Schroders Capital has invested more than US$1 billion in over 30 transactions since the onset of Covid-19. Van der Kam, who joined from Unigestion in September 2020, plans to grow his six-person team to 10 by the end of next year. 

Demand for GP-led secondaries deals hit a record US$60 billion in 2021 but have since tumbled, according to a report by Campbell Lutyens, a private markets advisory business. BLOOMBERG