Secondary Fund Investing Strategy

Investments in a private equity fund are generally illiquid, with investors committed for the life of the fund. From time to time, as a result of a change in strategy or circumstances, investors seek early liquidity by selling their position to another investor in the private markets. The secondary market for private equity fund portfolios is opportunistic and often based on relationships among fund managers and their major investors.

Secondary fund investing can enhance risk management and financial returns within a private equity fund of funds portfolio. Typically, the risks are reduced as the existing investment portfolio can be evaluated and priced based on hard data, rather than merely the historical track record and future potential of the manager. Returns can be enhanced as the purchase of a secondary fund portfolio requires an immediate investment of capital, and provides earlier investment realizations than a primary fund investment which is drawn down over a number of years with distributions commencing a few years after initial draw downs. Secondary portfolios may be acquired in part with debt financing, designed to be serviced from the secondary portfolio distributions. This technique can enhance equity returns on mature portfolios.

Kensington is well positioned to be a secondary investor in the private equity markets, with many strong relationships among fund managers and major investors, and a professional team experienced in the evaluation of portfolio assets.

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