Investment activities and teams for all three investment types are fully integrated. We believe that everything needs to fall under the same investment philosophy, and that the GP relationships formed through primary investing are essential to sourcing and executing secondary investments and direct/co-investments.
Primary fund investments, i.e. investments through several funds into portfolio companies have been an effective way to obtain a diversified exposure to the private equity asset class.
Schroder Adveq’s primary activity focuses on capturing alpha by accessing specialized strategies and segments across the whole company life cycle. For this pupose we are maintaining a global network of relationships with highly specialized fund managers.
Secondary fund investments involve buying and selling pre-existing investor commitments to private equity funds. Investors who consider secondaries expect benefits such as increased portfolio transparency, faster build-up of private equity exposure and reduced J-curve effects on early performance.
Our approach to secondaries builds on our primary investment activity and is consistent with our overall investment philosophy. This means avoiding auction-driven transactions and focusing on less competitive situations where the process is either controlled by the fund manager or directly sourced from other investors. It also means focusing on smaller transactions in the specialized strategies and segments we favor and focusing on those transactions that are not as straightforward to assess.
By directly investing into portfolio companies alongside other investors, participants expect higher returns, increased portfolio transparency, higher control and a reduction in overall fees.
We believe that investing directly alongside a private equity firm should only be pursued when all parties - the portfolio company as well as investors and the fund manager - can benefit from it. Our approach has been to leverage our strong primary fund manager relationships. In addition to the requirement that any transaction be within their core strategy, there must be maximum alignment of interest with the fund manager.