Spotlight on Pauline Wetter, Partner, Private Equity, LGT Capital Partners
Global Thought Leader Spotlight
Pauline Wetter, Partner, Private Equity, LGT Capital Partners
In my role as Investment Partner and Co-Portfolio Manager of the Private Equity portfolio for the Princely Endowment at LGT Capital Partners, I am responsible for origination, due diligence, execution of private equity investments on the one hand, but also for portfolio construction of PE portfolios, with a specific focus on Secondaries.
Prior to joining the firm in 2011, I spent several years at Mooreland Partners in London, an investment banking advisory firm focused on the IT and telecommunications sectors.
Evolving role of secondaries in private equity
For the last few decades, private equity has shown exponential growth and the return potential remains high for experienced investors. However, due to rising financing costs and the slowdown in capital markets activity, the unrealised value of private equity portfolios has reached record levels. This situation is a problem for both Investors (Limited Partners (LP)) and PE Managers (General Partners (GP)), who are seeking ways to raise liquidity. For both parties, the secondary market now plays an essential role.
Traditional LP-led secondaries benefit both investors needing liquidity and investors seeking diversified, mature portfolios of private equity. Given you come in later in the investment’s lifecycle, it helps mitigate the J-curve effect resulting in faster deployment and quicker distributions. Typically, you also acquire the portfolio for a discount to NAV as compensation for solving a problem for the LP.
Even though secondary market transactions are now more numerous and accessible, buyers must remain highly selective. A quality network of GPs and business relationships allows for preferential investment in companies where limited public levels of information are available. This informational advantage, resulting from a large PE fund selection platform, is the “secret sauce” to being successful in this market.
Although traditional LP-led secondaries remain a core part of the secondaries landscape, the industry has evolved to provide other innovative solutions for those needing liquidity. This includes GP-led continuation vehicles and direct equity secondaries as two examples. The key is being able to offer flexible and creative liquidity solutions across the full lifecycle of the investment. This is how you become a trusted and long-term partner to both LPs and GPs.
Implications for sophisticated investors
Investors in traditional primary PE funds are likely feeling the pinch from a lack of distributions in the last three years. A healthy distribution yield is somewhere between 20-25%, while more recently it's been somewhere between 10-15%. This unrealised NAV has made it difficult for investors to reinvest capital into new funds. As a result, investors and GPs are increasingly turning to the secondary market to improve the liquidity in their portfolio.
The secondary market offers numerous advantages for investors. By acquiring a broad portfolio of PE companies at a later stage, it provides immediate exposure to mature private equity investments, mitigating the J-curve through discounted investments, faster deployment, and quicker distributions. Faster distributions can help improve returns through the compounding effect of reinvesting distributions. Furthermore, the secondary market has countercyclical properties during market downturns as liquidity providers benefit from sellers' liquidity needs and, consequently, from discounts. This strategy also allows instant diversification across multiple dimensions (vintages, funds, managers, and companies).
Given the quantity of unrealised assets and strong demand for liquidity from market participants, different types of transactions are developing in the secondary market which investors may be less aware of.
A recent innovation to the secondaries market are direct equity secondaries. Direct equity secondaries, also known as “mid-life co-investments” are solutions for GPs to generate partial liquidity for investors (equity recap) or inject additional equity into businesses to fund future growth (follow-on financing). They sit in between traditional co-investments and traditional secondaries. Conceptually this is because the liquidity profile is similar to traditional secondaries (i.e. reduced J Curve, higher IRR’s) with the fee efficiency (i.e. no look through economics) and concentration (i.e. individual companies) from traditional co-investments.
Given the long-term time horizon of traditional PE (10 yrs+), there will always be demand from investors seeking liquidity. Being a liquidity provider that can offer flexible solutions across the entire lifecycle of the transaction is unique. To do it successfully, you need a strong PE platform.
Pauline will be presenting at Global Investment Institute’s upcoming Family Office Investment Forum, taking place on Tuesday, 9 September 2025 in Melbourne CBD, Victoria. To register your interest in attending, click here or for more information email zlatan@globalii.com.au.
Pauline Wetter, Partner, Private Equity, LGT Capital Partners
Pauline is a Partner at LGT Capital Partners in Pfaeffikon, Switzerland, where she is also an investment committee member. Pauline is responsible for origination, due diligence, execution and monitoring of European secondary transactions, and she has an additional focus on primaries. Prior to joining the Firm in 2011, she was an associate with Mooreland Partners in London, an investment banking advisory firm focused on the IT and telecommunications sectors.
Pauline holds an MSc in Management from ESCP Europe in Paris. She is fluent in English, French and German.
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