Audax Group has hired two DWS Group executives to help build out a new strategy to invest in secondhand stakes of private-equity assets, according to people familiar with the matter.
Kumber Husain, managing director and head of Americas for the private-equity secondary business at DWS, and Daniel Green, managing director and head of the firm’s Europe, Middle East and Africa regions, are joining the Boston-based private-equity firm, the people said. Audax has made several other offers to build out the team, these people said.
DWS was part of Deutsche Bank before the asset manager’s initial public offering in 2018.
Mr. Husain joined DWS in 2018 to help source and execute secondary, co-investments and direct investments. Before that, he was a portfolio manager and investment committee member at Morgan Stanley Alternative Investment Partners, according to DWS’s website. He has also had stints at New York-based private-equity firm WP Global Partners and Swiss Reinsurance Company Ltd., in its corporate development group, according to the website.
Before joining DWS in 2018, Mr. Green was a senior director at investment advisory firm Meketa Investment Group where he led the group’s investment activities in private-equity and real assets across the EMEA region, according to his biography on the DWS website. He worked at Greenpark Capital, a U.K.-based secondary private-equity fund manager, before that.
Audax is an early mover among midmarket private-equity firms in building a secondary investment strategy, which will help the firm back sponsor-led deals by fund managers that want to extend their hold on prized assets. Larger asset managers like Apollo Global Management and TPG have lured investment professionals from other asset managers to build out similar secondary strategies.
These firms aim to capitalize on the opportunities and challenges stemming from the dramatic growth in both the number and volume of sponsor-led secondary transactions in the last two years, according to three secondary buyers and two investment advisers. Sponsor- or general partner-led secondary transactions accounted for 52% of the $132 billion secondary transaction volume in 2021, according to a report by investment bank Jefferies Inc. Sponsors brought more than 100 such transactions to market, which accounted for $68 billion in volume, with volume expected to continue this year, the report said.
Setting up a secondary fund to invest in these sponsor-led transactions would help firms like Audax, Apollo and TPG access good investment opportunities, these people said. It would also help them mitigate the challenges posed by sponsor-to-sponsor sales, they said. The growth of sponsor-led secondary transactions, particularly deals involving a single company, has been displacing traditional sales of companies from one private-equity firm to another, one secondary buyer said, adding that launching a secondary strategy allows these firms to get a “toehold in these great companies.”
New firms are entering the secondary market as the supply of available deals has begun to outpace the capital available to back them, the people said. The amount of capital raised for secondary transactions but not yet invested declined by about 7.1% to $105 billion at the end of 2021 from $113 billion a year earlier, according to a report from investment bank Evercore Inc. Meanwhile, the amount invested in secondary transactions more than doubled, sucking up available capital even as firms have raised new funds. According to Evercore, secondary-focused firms aim to collect $73 billion in new funds this year, but that still isn’t likely to ease the capital constraints for sponsor-led secondary transactions, these people said.