This section includes investor type descriptions for professional clients and market counterparties.
Professional client
A Professional Client is either: (i) a ‘deemed’ professional client; (ii) serviced-based professional client; or (iii) an assessed professional Client
(i) Deemed Professional Client
A person is a “deemed” professional client if the person is:
(ii) Service-based Professional Clients
A person is a ‘serviced-based’ professional client if
(iii) Assessed-based Professional Clients
Assessed-based professional clients can be either (i) individuals; or (ii) undertakings
Individuals
An individual (and associated joint account holders) would be classified as an ‘assessed-based professional client’ if:
Where there is a joint account in place, the secondary account holder must obtain confirmation in writing that investment decisions relating to the joint account are made for or on behalf of the secondary account holder
Undertakings
Undertakings, which are generally not individuals, would be classified as ‘assessed-based’ professional clients if it:
Market counterparties
A Market Counterparty is any person who is either:
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
The time for infra secondaries is now. We believe infrastructure secondaries reaching new heights in the coming years.
We explore how secondary investors may be presented with opportunities that are interesting from both a risk-adjusted return and a portfolio construction perspective.
Infrastructure secondaries not only provide the traditional benefits of secondary investments, but may also offer additional distinct benefits specific to the infrastructure asset class.
Infrastructure assets may also offer inflation-linked revenues and pricing power along with stable, recurring cash flows from providing essential services further reinforced by high barriers to entry.
Relatively nascent phase resulting in a buyer-friendly gap. Small- and mid-sized transactions tend to fly under the radar, offering the potential to be selective.
Secondary transactions possibly offer immediate yield from as early as day one. Moreover, the chance to buy assets at a discount or opt for a deferred payment structure can mechanically boost yield.
Infrastructure assets may also offer inflation-linked revenues and pricing power along with stable, recurring cash flows from providing essential services further reinforced by high barriers to entry.
Relatively nascent phase resulting in a buyer-friendly gap. Small- and mid-sized transactions tend to fly under the radar, offering the potential to be selective.
Secondary transactions possibly offer immediate yield from as early as day one. Moreover, the chance to buy assets at a discount or opt for a deferred payment structure can mechanically boost yield.
Attractive pricing: Transacted infrastructure market pricing
Source
BlackRock, Campbell Lutyens Infrastructure Market Report H2 2023 and H1 2024 Secondary Market Overview, Evercore Private Capital Advisory H1 2024 Secondary Market Review, as of August 2024.
The formation and development of a secondary marketplace is a natural progression for illiquid asset classes, as seen in private equity and real estate. Over the past decade, Limited Partner (LP)-leds and General Partner (GP)-leds have each accounted for about half of transactions. LP-led secondary investments are typically acquired at a discount to NAV (Net Asset Value), driving immediate uplift. Pricing is often based on a historical reference date valuation, which may be stale at acquisition, potentially resulting in an effective discount higher than the optical discount, further enhanced through deferred payments.
Infrastructure secondaries can play a variety of roles within a portfolio, for both new and existing infrastructure investors alike.
As infrastructure secondary penetration rates begin to catch up to the levels seen in private equity in the early 2000s, transaction volumes are expected to ascend to new heights in the coming years. As these conditions persist, we anticipate buyers could be presented with attractive investments at compelling prices. The time is now.
There are several ways for investors to engage with infrastructure secondaries. Institutional & high-net-worth investors can access infrastructure secondaries opportunities via LP-led, GP-led secondaries or bespoke structured solutions, through private funds and separately managed accounts.
There is no guarantee that any forecasts made will come to pass.
Sources: BlackRock, as of August 2024.
1) Campbell Lutyens – Infrastructure Market Report H2 2023, CBRE, 2023.
2) Inframation – Infrastructure M&A transaction; Campbell Lutyens – Infrastructure Secondary Volume. All figures in USD unless otherwise stated.
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