Ross Hamilton, Managing Director at Partners Group, joined in the recent ION Influencers fireside chat hosted by Giovanni Amodeo. The discussion focused on trends in the secondary market, providing valuable insights into the evolving landscape of private equity. Below is a refined summary of the key topics discussed during the interview:

Background and Role at Partners Group: Ross Hamilton shared his extensive experience in private equity, highlighting his 15-year career, including a decade at Partners Group. He detailed his responsibilities, particularly in secondary investing, and his role on the investment committee.

Overview of Partners Group: Hamilton provided an overview of Partners Group, emphasizing its focus on private markets, including private equity, infrastructure, real estate, and private credit. He noted that Partners Group manages around $150 billion in assets and is listed on the Swiss Stock Exchange.

Evolution of the Secondary Market: Hamilton discussed the four major cycles in the secondary market over the past 25 years:

• Post-dotcom Bubble: Investors sought liquidity amid falling venture capital valuations.
• Global Financial Crisis (GFC): Liquidity crises led to significant secondary market opportunities.
• Eurozone Crisis: International investors pulled capital out of Europe, creating secondary opportunities.
• Post-COVID Valuation Correction: Institutional investors, feeling overexposed to private equity, turned to the secondary market.

Commonalities and Differences in Market Cycles: Hamilton highlighted that sellers often feel overexposed to private markets, driving their decision to sell. He contrasted the liquidity-driven sales during the GFC with the valuation-focused sales in the post-COVID era.

Assessing Seller Motivation: Hamilton explained the importance of understanding seller motivations, which can influence transaction dynamics. He emphasized the need for secondary investors to provide solutions that align with sellers’ objectives, such as offering deferred payment structures.

Market for Low-Quality Content: Hamilton acknowledged the existence of a market for lower-quality or mature portfolios, which typically trade at bigger discounts. He noted that some investors specialize in these types of assets.

Transparency and Role of Intermediaries: Hamilton observed increased transparency in the secondary market over the past decade, driven by a growing number of investors and high-quality intermediaries. He noted that most transactions now involve intermediaries to ensure arm’s length processes and competitive pricing.

Due Diligence and Expertise: Hamilton detailed the rigorous due diligence process at Partners Group, leveraging sector-specific expertise to evaluate underlying portfolio companies. He emphasized the importance of forming independent views on key value drivers and potential risks.

Educating the Market: Hamilton highlighted the role of case studies in educating potential sellers and investors about the secondary market. He stressed the importance of demonstrating the market’s utility and potential for attractive returns.

Originating Transactions: Hamilton discussed the proactive role of secondary investors in originating transactions, including engaging with potential sellers and intermediaries. He noted the growing trend of repeat sellers who recognize the secondary market as a valuable portfolio management tool.

Continuation Funds: Hamilton described continuation funds as a tool for GPS to extend ownership of high-performing assets while providing liquidity to investors. He noted the increasing acceptance of continuation funds as a standard exit route in private equity.

Future of the Secondary Market: Hamilton predicted continued growth in the secondary market, driven by both LP portfolio trades and the use of continuation vehicles. He anticipated that the market could surpass the $200 billion level within the next few years.

Conclusion: The fireside chat with Ross Hamilton provided a comprehensive overview of the secondary market’s evolution, current trends, and future prospects. His insights underscored the market’s maturation and the strategic role of secondary investing in private equity.

Key timestamps:

00:09 Introduction to the Fireside Chat
01:00 Understanding Partners Group and Its Focus
01:38 Historical Trends in the Secondary Market
03:47 Commonalities in Market Cycles
04:53 Assessing Seller Motivation
06:52 Identifying Red Flags in Transactions
07:56 Market for Low-Quality Assets
09:09 Transparency in the Secondary Market
10:02 Role of Intermediaries in Transactions
11:01 Insights from Underlying Portfolio Companies
12:38 Depth of Due Diligence in Transactions
14:40 Differentiating Skill Sets in Private Equity
16:26 Educating the Market on Secondary Transactions
17:51 Transaction Origination Strategies
25:57 Looking forward and conclusion