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Blackstone tops list of most sought-after managers on secondary market

  • Brand-name managers that have raised lots of capital are most popular
  • 35 most sought-after funds had 62 buyers on average
  • In-demand managers’ funds posted an average IRR of 16.62 pct

Blackstone Group’s family of buyout funds is the most popular on the secondary market, maintaining its top position year-over-year in intermediary Setter Capital’s ranking of the 35 most sought-after managers.

Bain Capital came in second, moving up one spot. Onex Partners jumped from 35 to 25, and Vista Equity Partners improved from 34 to 27.

The rankings are based on Setter’s liquidity ratings, which weigh demand and pricing to score fund families as excellent, very good, good or unrated. “As a team, here at Setter we talk to buyers all day long,” Managing Director Peter McGrath told Buyouts. “A big part of our business is just staying close to what buyers are hunting for, which are their most favored funds, what they’re seeking and what their pricing is.”

On average, the 35 most sought-after funds had 62 buyers, compared with just eight for unrated funds. “The number of buyers per fund family continues to rise,” McGrath said. “These top managers garner so much interest, it’s really skewed. As soon as you go into unrated territory, [demand] drops off a cliff.”

Buyers gravitate toward brand-name funds like Blackstone and Bain perhaps because they view them as less risky. Accordingly, the funds of popular managers command a significantly better average price: 94.94 percent of net asset value for the top 35, versus 77.81 percent of NAV for the rest. And that pricing differential is backed up by performance, with the top 35 managers’ funds posting an average IRR of 16.62 percent, and the unrated returning 5.55 percent.

McGrath said there’s a relationship between raising more and bigger funds and being sought-after on the secondary market: “Groups like to buy managers that they’re already in. If they like them on a primary basis, they like them on a secondary basis.” That dynamic is reflected by the average number of funds and fund size raised by the top 35 managers and their unrated counterparts: nine funds of $3.23 billion, versus four funds of $1.83 billion, respectively.

Here are the top 10 fund families, according to Setter:

  1. Blackstone Capital Partners
  2. Bain Capital (Flagship LBO Funds)
  3. Advent International Global Private Equity
  4. Apollo Investment Fund (Flagship LBO Funds)
  5. Carlyle Partners (Flagship LBO Funds)
  6. Hellman & Friedman
  7. New Mountain Capital
  8. TPG (Texas Pacific Group)
  9. Silver Lake Partners
  10. Warburg Pincus Private Equity

Action Item: View the full list here: The 35 Most Sought-After Managers (US Large LBO – Q3 2017)

Stephen A. Schwarzman, chairman and CEO of Blackstone Group, looks on during an interview with Maria Bartiromo on her Fox Business Network show, “Opening Bell with Maria Bartiromo,” on Feb. 27, 2014, in New York. Photo courtesy Reuters/Brendan McDermid