Direct, secondary private equity investments managed by a specialist manager. Underlying investments to be diversified by geography, industry and transaction type.
The average discount to NAV for prior Headway investments had been approximately 50%, which offers some downside protection and means that the Fund does not require additional leverage to meet its return targets.
Investment strategy
Investors in secondary private equity transactions buy existing private equity investments, either in funds or in underlying companies. The investors holding these illiquid stakes are often motivated sellers, which means that secondary investors may be able to acquire them at a significant discount to their current value.
As these investments are at a later stage than traditional primary private equity investments, secondary investors often benefit from early cash distributions and earlier exits. Returns are driven by the discount to NAV and by
the secondary investor’s ability to continue to develop the underlying investments and find attractive exit opportunities.
The Fund targets secondary investments, predominantly in Western Europe and North America, and has a focus on small- and mid-sized transactions and complex situations. This is a relatively under-served market, with limited competition allowing Headway to source many transactions directly and structure investments with attractive returns and considerable downside protection.
The fund manager
Headway was established in 2004 and is authorised and regulated by the FCA. It has a team of 16, including eight investment professionals. The team, based in London but with a Boston office too, is multinational and highly diverse, with a broad range of experience in both direct and secondary private equity.
Headway targets investments in under-addressed areas of the secondaries market and has a broad, opportunistic mandate, with no specific geographic, investment stage or sector constraints. This allows the Manager to build a diverse portfolio of the opportunities that it considers offer the best risk-adjusted return at any given time.
Why do we like this private equity secondaries fund?
This fund offers private clients a niche approach to secondaries with the manager focusing on an underserved part of the private equity secondary market. Limited competition here allows the manager more control over pricing and the ability to be selective in choosing the most attractive risk/reward assets for the portfolio. Typically Headway have sourced transactions through their proprietary network at attractive entry valuations with EBITDA multiples below the industry average.
Secondary investing allows for broad diversification across companies, funds, GPs, geographies, industries and vintage years. Prior vehicles have been very diverse. The focus of the Manager on more niche and esoteric situations helps to increase diversification as it is unlikely that transactions will have many overlapping characteristics.
