Onions, outrageous predictions and what’s in store for 2025
Our latest episode of Second Thoughts involved a basket of onions, a permanent marker and two well-respected professionals from Kirkland & Ellis and CVC Secondary Partners.
By Adam Le
“Peeling back the onion” is an idiom that private markets professionals often like to use. For our last Second Thoughts podcast episode of 2024, we thought we’d see if we could do this literally.
On a quiet Friday towards the end of November, Secondaries Investor welcomed Ted Cardos, who leads Kirkland & Ellis 's investment fund secondaries practice in Europe, and Carlo Pirzio-Biroli, head of CVC Secondary Partners (formerly Glendower Capital) , to our London office. To meet them were senior reporter Madeleine Farman, senior editor Adam Le and a basket of onions. Each onion had a topic or theme written on it in permanent marker: from ‘Biggest let down’ to ‘Deal volume’; ‘Asset class expansion’ to ‘Pricing’.
Cardos and Pirzio-Biroli – both seasoned market participants – proceeded to pick onions at random. Thoughtful discussion ensued on both how 2024 played out and what is likely in store for the market in 2025.
“More than half of all single-asset continuation funds by the end of next year will have premium carry,” said Cardos, after drawing the ‘Outrageous prediction’ onion.
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The market is already seeing a divergence in the way waterfalls are structured for multi-asset versus single-asset CVs: a multi-asset CV will always have tiered carry typically between 10 percent and 20 percent. Single-asset CVs typically start at 15 percent and round out at 20 percent. With pricing a relatively level playing field, secondaries investors will soon position themselves as attractive lead investors by offering sponsors higher than average performance fees on the continuation funds they run, Cardos said.
Such a structure is only likely to be applied to assets that are expected to perform north of 2.5x, Cardos added. “If people are competing for those trophy assets, the cost of doing so might just be that additional 5 [percentage points] on the top end of the carry.”
For Pirzio-Biroli, he reckons 2025 will be the year of the CV on the CV – something that he says is already happening. “You have a CV and then when they reopen six, 12 months later, a year later and you’re letting people in and out.” There could even be secondaries funds that focus on investing in CVs on CVs – a notion Pirzio-Biroli acknowledged was indeed outrageous.
We’d love to tell you the discussion ended with crying over a dozen half-peeled onions scattered across the recording studio floor. Alas, it did not. It did end, however, with all in agreement that 2024 was a rollercoaster for the secondaries market and that 2025 looks like it’s going to be another fascinating year. We’ll gladly shed some tears of joy for that.
Write to the author: adam.l@pei.group
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