Andrew Krei is co-chief investment officer at Crescent Grove Advisors, and founding partner and co-chief investment officer of Barrett Upton Capital Partners LLC, a new alternative investment firm established to provide high-net-worth and institutional investors with turnkey access to a variety of opportunities in private markets. To learn more, visit https://barrettupton.com/.
Russ Alan Prince: Can you explain what Barrett Upton Capital Partners does and why it was created? Why launch the platform now?
Andrew Krei: Barrett Upton Capital Partners is an alternative investment platform that was purpose-built by a registered investment advisor, RIA, to solve an identified issue across our client base—namely, to provide access to high-quality alternative investment managers at reasonable minimums. The challenge for many investors seeking private markets exposure is that top-tier funds are frequently oversubscribed, have high minimums, or are simply not taking new investors. Our team at Crescent Grove Advisors, an employee-owned RIA with over $4 billion in assets under management, decided to leverage our decades of experience allocating to private markets and a deep network of relationships in an effort to overcome these roadblocks.
In addition to tapping our investment team’s sourcing and diligence capabilities, we’re bringing a practitioner’s portfolio construction perspective. Barrett Upton focuses on creating turnkey solutions across alternative asset classes that complement investors’ traditional exposures. By keeping minimums low, allocators can build alternatives portfolios that are appropriately diversified by asset type and vintage year. Ultimately, we’re creating an opportunity for investors to approach private markets just like the largest, most sophisticated institutions and family offices.
The Barrett Upton platform is the result of years of planning and has been imbued with the team’s collective experience investing in alternative investments on behalf of high-net-worth and institutional clients. The last 18 months catalyzed its launch, as we saw investors reminded of the critical role that alternative investments can play in portfolios during difficult market environments and the opportunities that can emerge as a result of these dislocations.
Prince: You mentioned that Barrett Upton provides high-net-worth and institutional investors access to a variety of opportunities in private markets. Are you focused on specific asset classes or strategies?
Krei: Barrett Upton targets investments across private markets, which encompass a broad array of assets, including private equity, private credit and real estate. Our team has an extensive knowledge of the alternative investment landscape, and we’ve built a flexible infrastructure that will allow us to pursue the most compelling opportunities in any given market environment.
Within each alternative asset class, we’re focused on generating attractive returns relative to public markets. In our view, the best way to achieve that goal is by identifying managers that have sustainable and repeatable competitive advantages. For investors without the time or resources required to unearth these opportunities, we can offer a thoughtful, efficient solution.
Prince: Within private equity, secondaries are not something that is talked about often. What is it about them that makes them so interesting?
Krei: Investors generally think about accessing private markets through managers that make “primary” investments in areas like private equity or real estate. A less common approach is to look at “secondaries,” or managers that acquire preexisting investments in funds or individual private assets. These tend to be more specialized transactions pursued by teams dedicated to secondaries investing.
The secondaries market is generally segmented into “LP-led” and “GP-led,” reflecting which party is leading the sale process. In LP-led transactions, investors will look to sell their interests in private funds or assets. These sales are typically driven by liquidity needs or portfolio rebalancing, resulting in sellers that may be less price-sensitive. In some cases, funds will only allow sales to approved firms, creating proprietary deal flow for well-connected secondaries managers.
In GP-led situations, managers are faced with the end of their fund’s term and need to offer liquidity to their investors. A fund may own a “trophy asset” that still offers meaningful upside over the coming years, so the manager may want to avoid a forced sale. In that case, a secondary buyer would partner with the fund manager to buy the asset via a “continuation vehicle.” GP-led secondary funds will build portfolios solely comprised of these transactions.
In either case, secondaries investments can offer several advantages. For one, they provide greater transparency for investors. Instead of committing to a “blind pool,” underlying portfolios are usually fully allocated, or managers can cherry-pick specific assets. Moreover, purchases are frequently completed at discounts to recent valuations. This reflects the cost of liquidity in private markets and is a function of the imbalance between the supply of secondary capital and the demand from sellers. Last, by purchasing funds or assets at a more mature point in their lifecycle, secondary investments are typically shorter duration and have historically returned capital to investors more quickly.
With so much unrealized net asset value locked in funds launched prior to 2018 and a challenging backdrop for exits, the coming years should offer ample deal flow for secondaries buyers. Funds focused on this segment of the market—particularly within private equity and venture capital—can help investors tap into these compelling opportunities.
Russ Alan Prince is the executive director of Private Wealth magazine and chief content officer for High-Net-Worth Genius. He is a strategist for family offices and the ultra-wealthy.