Food for thought from BlackRock and Tioopo Capital on the secondaries market, and what it tells us about the broader state of private capital liquidity.
Recent analyses of US infrastructure funds in the secondaries market reveal significant discounts to net asset value, particularly for recent vintages. This data point offers a window into broader liquidity dynamics across the private equity industry as a whole.
What the data shows
Secondary transactions for recent-vintage infrastructure funds have been pricing at meaningful discounts to NAV, a reflection of both the rate environment shift and the lengthening of holding periods across alternative asset classes.
Several factors drive this trend:
- Higher discount rates have compressed valuations for long-duration assets, including infrastructure
- Distribution slowdowns across private markets have created liquidity needs for LPs
- Asset-specific reassessments, particularly in renewable energy infrastructure where build cost inflation has impacted projected returns
What this means for our strategy
At Tioopo, we focus on operational value creation in niche industrial SMEs, assets we acquire at disciplined entry multiples and improve through hands-on engagement. This approach is designed to be resilient across liquidity cycles, with returns driven primarily by cash generation rather than multiple expansion or exit conditions.
The current market environment validates our strategy: in a world where distributions are scarce and valuations are uncertain, the businesses that generate consistent cash today are worth more than those that merely promise it tomorrow.