Aleks Bakic Quoted in Private Equity International on Risks for LPs in Secondaries Market
Private Equity International has quoted Akin Gump investment management partner Aleks Bakic in the article “When secondaries go wrong: What the lawyers think.” The article looks at some of the legal and regulatory risks that limited partners (LPs) should consider in advance of any downturn in the market.
According to the article, when a fund’s net asset value drops and LPs who rolled their interests into their general partner’s continuation vehicle begin to wonder whether they should have sold their interests instead, there could be legal implications. There are some secondaries managers, the article says, who try to limit potential risks by testing the market, running an intermediated process, keeping LPs involved and disclosing fully. Others take a less robust approach and rely solely on the fund’s limited partner advisory committee (LPAC) for approval.
“Somewhere on that range, the regulator may zero in,” said Bakic, who focuses on private funds and secondaries.
It has become common, the article notes, for LPACs to hire their own legal counsel and demand that a general partner seek a third-party valuation opinion, both at the fund’s expense.
“It’s not impossible to envisage the role of the LPAC being replaced by some other mechanism, an independent expert or something like that,” added Bakic.