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Q: What kinds of companies are in the portfolios you favor — high-tech, low-tech or what?

A: Our preference is to build a diversified portfolio, so we want to have a variety of companies in the mix. This highlights one of the advantages of a secondary fund, which is that we are able to identify most of the companies in partnerships that we buy. This gives us more control over the diversification in our partnerships.

Q: What has been the most common “exit path” for companies in portfolios you acquire – the way value is unlocked for distribution to investors? Initial Public Offerings (IPOs), leveraged buyouts (LBOs), buyouts by larger companies, management buybacks, or what? How do you expect this mix to evolve, and why?

A: In terms of number of companies, most of our portfolio companies will be acquired. While this has always been the case, the huge upswing in the purchasing power of private equity firms focused on buyouts is certainly increasing merger activity. We’ve seen several recent instances where one of our companies has been sold to another private equity firm. We’ve also seen instances where a company will go through the registration process for an IPO, only to be acquired before the IPO is priced. We expect that most of our “home runs” in future funds will come from companies that exit through an IPO, and this is especially true in the case of venture capital-backed companies.

Q: How important is the “execution” aspect of your work – all the paperwork of making deals happen?

A: Doing a sound job on valuation is probably our most important job, but this is not to minimize the importance of executing successful transfers. Once the valuations have been determined, there is still the process of negotiating the purchase price with the seller and documenting the terms and conditions of the transfer. It’s vitally important to control the cost of the transfer itself, since these costs are included in the cost of the investment and ultimately the rate of return generated by our partnership. We, along with our lawyers, have become quite adept at making this process as efficient and cost-effective as possible. In a previous partnership, we transferred 24 partnership interests in 30 days, and in an orderly and efficient manner. It’s critically important to manage this process efficiently, so that it goes as smoothly as possible for sellers, many of whom may be unfamiliar with the process. Our approach is to work closely and openly with sellers, so that they understand our process and are comfortable that they are receiving a fair price.

Q: Does being small give Symmetry some advantages vis-à-vis the big players in the secondary market?

A: The biggest difference besides scale (which is obvious) is focus. As the giant funds and organizations have grown, they’ve expanded their investments beyond secondaries. They acquire interests in direct investments, primary private equity partnerships and secondary real estate transactions, to name a few of their activities. We have always believed that focus is an advantage for a small firm, and we intend to continue to limit our activities to secondary partnership investing in sectors that we already understand.

Q: Are there other things unique about Symmetry that I should know?

A: We believe that our team’s experience is unique in our market space. Our primary-partnership investing experience enables us to assess the strength of fund general partners and the viability of their investment strategies (our principals have committed over $195 million to more than 45 primary partnerships). The direct investing experience we both have, dating back to the 1980s, gives us an uncommon ability to value underlying assets (companies) in funds we’re buying. Having purchased more than 50 secondary interests over the years has given us deep experience in finding and closing secondary market transactions. No other group we know of has this breadth and depth of experience, spanning several private equity market cycles. Finally, our commitment to raising a series of small funds, rather than increasingly larger ones, also makes us unique.

Q: How do I contact you?

A: You can reach Marshall Greenwald in our Chicago office at 312-634-0925 or mgreenwald@symmetryfunds.com and Larry Wonnacott in Denver at (303) 756-0274 or lwonnacott@symmetryfunds.com.

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