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September 19, 2022

Schroders to invest $1bn annually to buy secondary private equity

British fund manager Schroders is set to inject nearly $1bn every year to invest in pre-existing private equity deals, representing a two-fold increase spent by the firm in the sector, reported Bloomberg.

With the move, the company aims to be benefitted from the popular trend of buyout entities being a part of the businesses for longer durations.

The company will also concentrate on secondaries deals headed by general partner, as part of the new plan.

Typically, a buyout company, which is also called a general partner, is required to sell its portfolio firms after some time and give money back to its investors.

In secondary transactions, Schroders takes the position of investors who want to cash out. It provides the buyout company with additional time to strengthen the business’s valuation as well as earn fees.

Schroders Capital head of secondaries Christiaan van der Kam, was quoted by Bloomberg as saying: “There is a lot of opportunity here.

“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.”

According to Van der Kam, the company’s area of interest is small or mid-market deals. Since the Covid-19 outbreak, Schroders Capital has invested over $1bn in more than 30 transactions.

In addition, Van der Kam revealed the company’s plan to grow its headcount from six to ten by the end of 2023.

A report by private markets advisory firm Campbell Lutyens has stated that demand for secondaries transaction led by general partner reached $60bn last year, but the trend dropped since then.

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