Private equity in its most profitable form
Secondaries enable the entry into the profitable phase.
There are tens of thousands of private equity funds worldwide, predominantly invested by institutional investors. Due to their terms of at least 10 years, a premature sale due to restructuring or liquidity reallocation is only possible via the secondary market. The investment decision is made after a detailed examination, review and evaluation of a potential investment.
The life cycle of a private equity investment
The J-curve outlines the development of the cash flow of a private equity investment. In the first phase, this curve is still characterised by start-up costs, which are initially hardly offset by any distributions.
However, the J-curve is softened with secondary private equity investments. Investments acquired via the secondary market are generally already in the profitable phase. With this secondary strategy, Matador AG enables its shareholders to achieve above-average returns.
Picture: Private Equity J-Curve
Secondary private equity stands out with an optimal risk/reward ratio
As this chart shows, secondaries are the highest-yielding asset class in the private equity market with very low risk.
Figure: Risk-return profile of PE strategies