This report is powered by proprietary insights from TESS, Clipway’s Tech-Enabled Secondaries System – a next-generation investment and monitoring tool that puts data science at the  core of LP-Led secondaries investing. TESS capitalises on the large volume of data generated by diversified portfolios of private equity funds, which has historically been underutilised. These insights are driven by over 600 unique funds and over 8,000 underlying portfolio companies.

In this edition of Clipway Insights, we uncover some interesting patterns in the valuation of private equity portfolio companies with TESS data that suggests GPs may be reluctant to start marking down underperforming assets.

We find that these underperforming assets are statistically more likely to fall within the bottom 20-30% of the net asset value (NAV) of the mature private equity fund portfolios that secondary players tend to price. We examine the differences between these “Small” exposures compared to “Large” exposures, which account for the top 70-80% of NAV.

In particular, we look at the increased volatility in final outcomes for “Small” exposures and the potential impact on investor returns in the context of LP-led secondary transactions.

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