Multi-Asset Continuation Vehicles Make Sharp Comeback
Private equity managers this year are favoring continuation vehicles that house multiple assets over those with just one asset, according to data in a recent report from Greenhill, an affiliate of Mizuho, despite several recent eye-catching, multi-billion-dollar single-asset deals.
The first half of this year produced a far larger proportion of deal volume in multi-asset vehicles than last year, while the amount of transactions involving single-asset vehicles declined slightly, according to Greenhill’s data. Multi-asset deals made up more than half of all general partner-led transaction volume in the first half.
Overall, there does not seem to be a clear preference for multi-asset or single-asset continuation vehicles among investors, but the multi-asset ones can make sense when a manager invests in companies with a lot of similarities, said David Goldstein, director of fund services at fund administrator STP Investment Services.
“Maybe they hold several technology companies or several manufacturing companies, whatever the case may be, so their ability to exit those deals either because of liquidity or because they haven’t extracted enough value from those companies yet, is going to be the same, probably across their portfolio,” he said.
In addition, multi-asset vehicles can be less expensive and easier from an operational standpoint for investors who would prefer to invest in multiple assets, because there is one structure to manage as opposed to several individual single-asset funds, Goldstein added. However, it might be best for managers to ask their investors what works best for them.
“You don’t have to dictate the terms,” he said.
Read more from David Goldstein and other experts in FundFire.
