The investment activities, processes and investment teams are the same
for both primaries, secondaries and co-investments. Our underlying philosophy
for this is that the relationships with our General Partners formed through
primary investing are essential to sourcing and executing secondary
investments as well as co-investments.
The combination of our ongoing and thorough screening processes, our
longstanding history and relationships and our experience as an investor in
the lower-middle market makes us able to navigate and execute fund commitments
in the appealing subset of private equity funds that are hard to find, hard to
access and hard to diligence.
Primary fund investments, i.e. investments through lower-middle market
private equity funds into portfolio companies is an effective way to obtain
a diversified exposure to the private equity asset class.
The primary activity of Danske Private Equity focuses on capturing alpha by
getting access to specialized strategies and segments across the North
American and Western European lower-middle market. For this purpose, we are
constantly broadening and maintaining our extensive network of relationships
with lower-middle market private equity fund managers.
Secondary fund investments involve buying and selling pre-existing investor
commitments to private equity funds. Secondary investing is an efficient way
of getting vintage diversification into the portfolio and thereby also
mitigating the initial return impact of early fees against later returns
commonly referred to as the J-curve.
As Danske Private Equity primarily sources these opportunities among previous
and current portfolio funds, our approach to secondary investing builds on our
primary investment activity and is consistent with our overall investment
philosophy. Hence, our secondary efforts focuses on less competitive
situations where the process is either controlled by the fund manager or
directly sourced from other investors. Our secondary strategy generally
targets smaller transactions in quality funds and managers that are well-known
to the investment team.
By directly investing into portfolio companies alongside our General Partners
and possibly other third party investors, Danske Private Equity expects to
achieve higher returns, increased portfolio transparency, higher control and a
reduction in overall fees for our investors.
Co-investments represents a unique opportunity to leverage the relationship
with the portfolio funds in terms of fund and portfolio company insights, but
we believe that investing directly alongside our should only be pursued when
all parties - the portfolio company as well as investors and the fund manager
- can benefit from it. Our approach has been to leverage our strong primary
fund manager relationships. In addition to the requirement that any
transaction be within their core strategy, there must be maximum alignment of
interest with the fund manager. Given the more concentrated nature of
co-investments, great care is taken in the fund manager’s investment analysis
and allocation discipline.