Why Altaroc doesn't do high school

So at Altaroc, we're often asked why there are no secondaries in your portfolios? There are virtues to secondary investing, and there are limitations to secondary investing. Secondary investing consists of buying Private Equity portfolios from institutional investors at discounted prices. So, in a way, it's second-hand Private Equity. So there's an advantage: you buy it at a discount to a second-hand price, a discount to net assets. So on the day you buy it, there's a premium somewhere because you're buying Private Equity portfolios that are four or five years old. So, you're going to benefit from a discount on net assets. Today, the discount isn't huge on high-quality portfolios, it's 5%, maybe 7 or 8%. So, in a way, you're coming in with a discount, which you can't do in primary. But the disadvantage of a used car is like the disadvantage of a secondary, it has a shorter lifespan. So a secondary Private Equity fund, as you buy it with four or five years of age to get a real discount, only has four or five years left to live. So, in terms of multiple stakes, and our ambition is to make your capital work for you to optimize the multiple stakes, a secondary fund will deliver 1.4 times the stake because it only makes the capital work for four or five years, or even three years. Well, in terms of stake multiple, the mandate you've given us is to maximize it over a ten-year period.

So secondary funds don't serve this purpose. So, since our ambition is to make your capital work as efficiently as possible over ten years, we prefer to invest in extremely high-performing primary funds in order to get 2 times the stake, 2.2 times the net stake in these primary funds, rather than getting 1.4 times the stake in secondary funds. Having said that, secondary funds have one advantage: on the day you buy, you buy at a discount, and in Private Equity accounting, you recognize the capital gain on this discount on the day you buy the portfolio. So in terms of facial IRR, the secondary market has an advantage. It shows an accounting capital gain on the day of acquisition, the day you subscribe. So it has a small bonus at time T. However, over the lifetime of a Vintage Altaroc , it is less efficient. It has less battery, less recharging. The secondary, it goes less far, it makes 1.4 times the stake when very good primary makes 2.1 2.2 times the stake. So we chose... because the mandate you gave us was not to manage book value at a given moment, but to manage multiples over time. Today, we have chosen to expose our portfolios to primary investments or co-investments in order to maximize investment multiples, rather than a small IRR bonus at time T for a lower investment multiple. This is why, in the construction of our portfolios today, there are no secondaries. Once again, I didn't say that secondaries were of no interest, but in the construction of vintages Altaroc, they are not adapted.

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