When a secondaries fund is managed by a sponsor that has a separate private equity buyout platform, fund managers of prospective secondary transactions may have concerns about providing information to a competitor.
In the second article of a two-part series (read part 1), partner Joe Zargari discussed the legal structure of a secondaries fund, noting “an LP Stakes Fund is very diversified, so the risk is spread out across many different assets.” In contrast, he noted that a “GP‑Led Fund is far more concentrated.”
Additionally, partner Christine Lombardo said that conflicts of interest can “arise from stapled commitments, because the manager is making one investment to get access to other investments.” She added, for example, that if “a manager makes the stapled commitment through its fund of funds so that it can make the secondaries investment through its secondaries fund, the conflicts associated with that arrangement must be disclosed.”
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