The Ledger
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Madorsky: Retail capital will force secondaries into customer service businesses
“I think some of those reporting mechanisms are probably going to be expected by a lot of our limited partners, especially the retail community will push that idea in a pretty acute way. So it's going to move to a business of customer service. As much as invest…”
Madorsky: 40 Act funds pay 200-500 bps premium on secondaries
“Investment bankers would claim that the 40 Act funds are paying anywhere between 205 hundred basis points more than a typical fund. So it's putting pressure on the pricing.”
Madorsky: Secondary market volume could easily reach $400B to $600B
“Yeah, we could very easily see all of the secondary volume get to 406 hundred billion dollars.”
Madorsky: Multi-asset GP-leds enable early exits for weaker assets
“In a multi-asset GP-led transaction, we afford the availability and we push GPs to get rid of those
Weaker performing assets. Because all of the assets are getting reset at a price, and all of the economics are getting reset, if the GP sells their underperform…”
Madorsky: Actual PE fund lifespans stretch to 15 to 18 years
“It's not 10 years the life of a fund. It's not 12 years the life of the fund plus the two-year extensions. It's 15 to 18 years.”
Madorsky: Retail capital influx pressures fund managers toward secondaries
“I think when that capital comes into the market, there's pressure on those managers to invest it quickly, so therefore, secondaries is a natural avenue for that.”
Madorsky: Astonishing volume of PE asset sales failed in 2022 and 2023
“The amount of failed transactions that occurred in 2022 and 23 primary managers trying to sell their assets was astonishing. Effectively, unless it was a perfect asset, it wasn't going to trade.”
Madorsky: Most secondary market volume is strategic, not distressed
“In today's world, the majority of the volume that we see is probably executed around portfolio construction. And there's a lot of reasons to sell. Sometimes managers are over allocated to private equity. Limited partners are over allocated to private equity. L…”
Madorsky: Lower middle market buyouts historically outperform other PE classes
“And we also have the benefit that lower middle market, using Prequen data, that's historically outperformed all the other sub-asset classes.”
Madorsky: Up to 85% of RCP's secondary returns come from appreciation
“So much so that when you deconstruct our returns, about 80 to 85% of our total returns has been through appreciation, not through discount.”
Madorsky: AI will build initial PE financial models within three years
“In three years, certainly AI will be able to create a first or second run at our models. It might not be able to fine tune or drive a lot of the assumptions that we need the qualitative rich data that we're collecting, but to actually create and populate the E…”
Madorsky: Post-2022, LPs shifted focus from top valuations to liquidity
“But beginning in 2022, where liquidity really dried up in the market, limited partners recognized the value of the secondary market to drive liquidity in their portfolios. So, rather than saying, we don't feel like we're getting top dollar, I think a lot of li…”
Madorsky: Retail funds dominated large secondary portfolio purchases in 2024
“When we've seen a lot of the larger portfolios and even a lot of the limited partnership positions trade in 2024, the retail funds have been the main connoisseur of this product.”
Madorsky: PE will split into index, active, and boutique tiers
“I can imagine a space where private equity looks a little bit like the public equity manager market does today, where you have some people that are focused on almost like an index. That would be a pure retail product. Then you will have some folks that are cha…”
Madorsky: Average PE portfolio company hold period now exceeds six years
“When we first started, the average assumption on a company being held in a portfolio was four and a half to five and a half years. I think today that same assumption is probably six years plus.”
Madorsky: Five or more of top 10 PE firms are secondary players
“In 2010, of the top 10 biggest private equity firms globally, one or two of them were secondary players. If you look at it today, it's a handful or more. Meaning, secondary players are raising much bigger funds.”
Madorsky: Leonard Green, Advent, and New Mountain are raising GP-led funds
“A couple of them have already announced that they're raising funds, whether that's Leonard Green, Advec, New Mountain, and then a couple are quietly poking into the background.”
Madorsky: Traditional PE managers cut their flowers and water their weeds
“Historically in private equity, just on the principal investing side, managers had sold their best companies very early and got stuck with their worst companies. They cut their flowers and watered their weeds.”
Madorsky: PE secondary market volume grew from $20B to $180B since 2010
“When you look at the 2010 volume, it was right around twenty billion dollars. So let's mark our growth of the industry with the volume size... So twenty billion dollars, In 2010, a 170 or eighty billion dollars in 2024.”
Madorsky: GP-led deals reached half of secondary volume by 2020
“By 2020, about half the volume was GP-led transactions and half the volume was LP transactions. Juxtapose that versus 2010, it was all LP transactions.”
Madorsky: Yale and Harvard secondary sales are a return to market
“Although we see in the market that Yale and Harvard are selling, this is not their first sale. It's just actually a return to them selling.”
Madorsky: Expected 2025 secondary volume is around $190 billion
“Let's say in 2025 expected secondary volume is a hundred and ninety billion dollars, plus or minus.”
Madorsky: Secondary volume historically matches 1% to 1.5% of alternatives NAV
“Historically that Ratio, which has been the total volume over the total amount of NAV has been about one to one and a half percent.”
Madorsky: LP secondaries return capital faster and mute the J-curve
“Limited partnership or LP secondaries tend to return capital quicker. Additionally, there's a discount involved in many of the limited partnership positions. As a result, the J-curve is even more muted because we can write it up to the NAV at acquisition.”
Madorsky: FASB 157 established mark-to-market accounting in private equity
“The other piece of it was that prior to 2007, There was not a mark-to-market valuation methodology universally adopted. The NAV, the value of the position, was the lower of cost or market. Lower of the cost of market. The FASB rule of one 57 drove to a more ma…”