SuperInvestor LP snapshot: Cari Lodge, CF Private Equity
In November, SuperInvestor is getting a new home in Monaco. This will provide the space for even more private market professionals to gather, and share crucial updates on the industry, establishing connections to take their business further and develop the future of finance. In the coming months we will be shining the spotlight on some of the key LPs and GPs joining us at The Grimaldi Forum, to share exclusive insight on their investment strategies and key developments in the market.
This week we speak to Cari Lodge, Managing Director, Head of Secondaries, CF Private Equity, about their strategy in the secondary market. Learn about the vast opportunities in the are and figure out what the future holds for LP-led secondaries.
What’s your investment strategy?
We are experienced investors in the secondary market, providing liquidity solutions to global private market investors through both Limited Partner-led and General Partner-led transactions. Our programs are designed to provide investors with a diversified portfolio of private investments across managers, strategies, regions, industries, vintage years, and portfolio companies. Based on bottom-up analysis, we seek to identify high quality assets and take an opportunistic approach to finding investments that may be purchased at discounts to intrinsic value. We also capitalize on CF Private Equity’s advisory board seats and extensive network of manager and secondary industry relationships to seek to gain an access and knowledge advantage.
You’re specifically focused on the secondary market. What are the most interesting developments you’re seeing in this area right now and how are you expecting it to develop over the course of the next 1-3 years?
The secondary market remains both undercapitalized and under resourced. While volume was over $100 billion in 2023, secondaries comparatively make up just a fragment of the overall private equity market which has around $13 trillion [1] of assets under management. Looking at dry powder in the secondary market, one can easily see why the larger funds are getting larger and why there is a need for more capital. Fundraising for secondary funds has yet to keep up with LPs desire for liquidity. It remains a limiting factor in the growth of the secondary market. A $250 billion secondary market looks to be achievable in the next few years.
How are LP-leds growing and what does the future hold for them?
If one ever questioned whether LP-led secondaries were core to the secondaries market, one would only need to consider two factors: (1) the number of funds raised in a given year and (2) investors need for liquidity to manage their portfolios. Over the last few years, GP-led secondary transactions have seen significant growth, sometimes outpacing LP-led deals, as General Partners have increasingly looked to provide their investors with liquidity options and the opportunity to hold on to attractive assets for longer.
While the GP-led market is a great complement to the LP-led secondaries market, it’s not a replacement for it. Investors have unique portfolios and needs across the large number of funds invested. There were over 30,500 funds raised between 2009-20191, of which only a portion can be liquidated through GP-led transactions. This is especially true today since the secondary market is both under-resourced and under-capitalized. Layer on top of that the slower exit environment and investors need to manage their portfolio, and we believe LP-led secondaries will continue to be core to the market.
What are the most important factors you’re looking for within secondaries?
We seek to buy high quality companies at a discount to their intrinsic value. While we buy these companies typically through a fund structure, we are looking to find industry leading companies with low leverage, high margins and strong growth potential. We are trying to achieve IRR, ROI and DPI for our investors. We are building a complete portfolio.
As an LP, why are you choosing to attend SuperInvestor this year? How does it support you in reaching your goals?
SuperInvestor is a must go-to conference. It attracts a wide range of investors, general partners, secondaries brokers and key industry players. It is a fabulous way to connect with everyone in the industry over a few days. It is always informative and great for networking.
References
[1] Pitchbook 2023 Global Private Market Fundraising Report. Note: AUM data is as of June 30, 2023
