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Cattegatt Capital sees growing demand for ‘esoteric’ strategies on secondary market

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Alternatives secondaries broker, Cattegatt Capital, is seeing continued strong deal flow from investors looking for value in more “esoteric” hedge fund strategies, as the market for the better-known funds has “priced up”.

Founded by Lars Lindqvist (pictured), Cattegatt – with a fresh USD200mn of Q4 deal flow in the pipeline – is an independent specialist broker for secondary interests in hedge funds, private equity and other illiquid assets. Cattegatt works in a corporate-finance like and hands-on manner to match sellers’ and buyers’ best interests. The firm’s client base includes many of the largest professional investors in the world, who have a broad appetite for secondaries, as well as specialist investment groups with more defined interests.

Lindqvist says: “There has been a proliferation of professional investors looking for value in strategies such as structured credit and ABL funds. This is a new trend which is encouraging since it shows how the market has developed and how smart buyers are specialising in specific names to access value. The current secondary environment is very exciting.

“Many investors are keen to clean up their illiquid positions for the year-end and to take advantage of buyers’ continuous appetite for secondaries. Despite the market turmoil, which has increased risk premiums for most other asset classes, prices for secondaries seem to hold up well due to the already discounted margin of errors these assets trade at. When pricing secondaries, investors do not seem to price in any particular NAV growth, but rather attempt to predict future cash flows from liquidations, IPOs or sales trades, which naturally have become more uncertain, but for which there anyway is a level of tolerance. I guess many investors are keen to seize opportunities, certainly since it is unclear for how long the market will last”.

The relationship-driven model Cattegatt uses, in which both the seller and buyer are represented, has been well received among investors. In each mandate, Cattegatt works in a personal and tactical way while maintaining complete confidentiality among the counterparties to avoid the appearance of a fire sale or other misperceptions.

Unlike many of its peers, Cattegatt has only one business focus – secondaries – and engages with equal effort in single interests, full portfolios and baskets of assets in any size. The firm has completed deals ranging in value from just a few hundreds of thousands of dollars to USD100m, the largest single transaction to date closed by the company.

Cattegatt Capital is authorised and regulated by the FSA.

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