Secondaries with Jeff Leathers of Tap

Stewart: Welcome to another edition of the podcast. My name’s Stewart Foley, I’ll be your host. Welcome back. Thanks for joining us. Today’s topic is buying and selling private funds in secondary markets. We’re joined by Jeff Leathers, who is the co-founder and CEO of Tap. Tap is an electronic trading platform for private funds, and Tap is one of our newest members. Jeff, thanks for being on. Thanks for taking the time today.

Jeff: Thanks for having me on, Stewart.

Stewart: I just got done coughing my head off. I had a root canal this morning. Other than that, I’m in great shape to do this podcast. I want to start this off the way we start them all, which is, I’d love to know the town you grew up in, your first job, not the fancy one, and what makes insurance asset management so cool.

Jeff: I’m happy to answer all three, I guess. Yeah, I mean, so I grew up in the San Francisco Bay Area, so the heart of tech land in, if you want to know the town, a little town called Ross, north of San Francisco.

Stewart: Oh, wow, very cool. It’s beautiful there, right?

Jeff: It is quite beautiful there. Great place to grow up, and also great to grow up in the heart of tech land. The second question that you had was around where I first worked. It might sound fancy where I worked. I worked at a bunch of Hollywood studios, and talent agencies, but they were not fancy jobs, trust me. I was an assistant to producers, and talent agents, and all that type of stuff in my undergrad, and getting coffee, and running errands, and giving ad hoc tours of the studio lots, so not very sexy, but definitely a little glamorous.

Stewart: This is the second Hollywood connection we’ve had on the podcast. Cameron Black, who’s the CIO at Arizona Blue Cross worked at the Geraldo Show, and so that was his fun fact, which is really cool. All right, so what makes insurance asset management so cool?

Jeff: I think what’s cool is just how much insurance underpins a society, and how important it is part of society, that we get to manage these assets correctly. Yeah. I mean, so that’s really what I think is cool about it.

Stewart: I love that, because I think people really understate how important insurance is to society, right? Just imagine if you could have no insurance on your house or your car, how different you’d be thinking about those assets. I am so happy to have found Tap. I wasn’t familiar. Tell our audience about Tap, the founding of it, and why you and your partner did this.

Jeff: Tap is a technology company, first and foremost, that plays in the private markets, so private equity, venture capital funds, infrastructure, natural resources, and all the like. Specifically, we’re building a secondary market for private funds. The secondary market for private funds is really a crucial part of any market. In other marketplaces, we don’t really call, in stock market, we don’t really call NASDAQ the secondary market. We just call it the market. In private markets, we aim to make that the same way. Right now, there’s a thing called the secondaries market. This is where buyers and sellers come together to trade a private equity fund that may have been bought years ago, but now wants to be sold. There’s a whole system that has come up and about, over the past 20 years, in order to help trade these things.

Tap is really a data and technology infrastructure to help make those types of transactions more efficient. We basically pair our technology that helps folks do secondary transactions, that collects the data, and we pair that with a great group of advisors from very large banks who’ve done billions and billions of dollars of these transactions in the past, to really help folks like the listeners of InsuranceAUM who may be managing private assets out there actually better navigate those private markets.

Stewart: I’m such an advocate for a strong secondary market in private securities because I think it will ultimately allow insurers to make a larger allocation there, right? Because if they feel like they can come back out in a reasonable and efficient way, I got to think that that’s good for the market overall. But I’m getting ahead of myself. Can you talk about who the market participants are? There’s GPs, and LPs, and whatever else, but can you give us some background on just LP secondaries as an example?

Jeff: A little background on it. The first LP secondaries were done way back in 1979, and they’ve grown up hugely since then, right? In 2000, there was something like $2 billion, and today there’s over $100 billion, the past couple of years, done in these secondary transactions. LP secondaries traditionally has now been about 50% of the markets. There’s about $50 billion a year done in these LP secondary transactions. What these are is folks who’ve bought into a limited partnership. These are usually private equity or venture capital funds or the like, and they, for a variety of reasons, want to sell those securities. What’s come about is a bunch of buyers in the secondary market, these are called secondaries funds. There’s about $400 billion today of AUM in secondaries funds. As you can imagine, it’s a super popular, and growing strategy right now. In Q1, it was one of the most popular fundraising strategies out there in the private markets.

These folks, their entire reason for being is to buy these securities from the sellers, from the LPs. The GPs sit in the middle and the GPs, they generally, obviously, have all the data and they rubber-stamp the transactions as they come through. But GPs also now are big participants as sellers in secondaries, so there’s a GP-led secondary market that makes up the other $50 billion of secondary markets generally. There’s all sorts of reasons that GPs might want to sell, but they do it really to actively manage their own portfolios, and their own business. That’s really who the players in secondaries are. The last one I’d say is intermediaries. This is a heavily intermediated market. Most transactions, LPs or GPs will hire an advisor. These are big investment banks, companies like Tap who help those folks navigate the secondary markets when they need to.

Stewart: If I’m an LP, which… I don’t mean to be presumptuous here, limited partner, right?

Jeff: Yeah.

Stewart: That if I’m an insurance company CIO, and I’ve bought a private security, I am an LP at that point.

Jeff: Yes.

Stewart: Right? I just want to make sure I’ve got my ducks in a row here. Why am I going to sell? What’s the purpose, or what brings an LP to market?

Jeff: Historically, folks sold because of distress, way back in the day. When I say there’s transactions that were occurring in the ’80s, those folks really, they had to sell for whatever reason, there were regulatory changes or things like that to force them to sell. Lots of folks still sell for those reasons today. Sometimes, you might have turnover in personnel, you have a new CIO, they want to reallocate into the managers that they know better, or there may be regulatory changes. For instance, some of the things that we’re seeing going on right now with decoupling from China, folks are selling exposure that’s in Asia, right? Sometimes, it’s a more systematic reason to sell. But increasingly, and over the past 20 years, we’ve really seen this become a portfolio management tool. Just like you said before that one of the reasons that has held back insurers from getting allocated into privates where there’s great yield has been that there hasn’t been liquidity. Well, now they have liquidity in a way that they can manage their portfolio.

If you have obligations on the other side of this that you need to meet, there aren’t enough distributions coming out of the rest portfolio, you can actually go and sell in the secondary market at decent prices, because of the way the market has come up. You know what? Most of the LPs these days are taking advantage of that. About, I think, half of LPs are going to be selling into secondary, sometime within the next 24 months, is some of the stats that have been thrown around out there. It’s a very popular tool used to manage portfolios.

Stewart: That’s cool. I love the fact that the secondary market is improving, right? Can you walk me through the transactions process, stem to stern, if I’m an LP?

Jeff: I can walk you through. You’re right, it’s absolutely improving, right? The version of this process today is exactly what Tap is really trying to change. But if we walk through the steps a bit. It really is: you want to do a transaction, the first thing you want to do is you’re going to want to go out, and find counterparties to transact with. Usually, what you’ll do, like I said before, is you will hire an advisor, because these advisors have navigated this market many, many times before. You’re probably not a regular market participant here, so you don’t know who the buyers are. I’ll tell you there are many hundreds and hundreds of buyers, each with their own little needs and desires. You’ll go out, and you’ll hire an advisor, and you’ll approach the market with your transaction, you’ll get some indicative pricing. This is all done basically via email, and through your broker. You’ll get pricing, you’ll then usually open up a data room, pass along some more information.

They might do a little bit more of a thorough underwriting, and you’ll end up getting a final bid out of that, usually running a one or two-round little auction on these LP interests. From there, you’ll go through, and pay for the actual transaction. You need to sign a purchase-sale agreement, a transfer agreement, and other documents, get that processed by the GP. The whole process generally takes about eight weeks. Many processes take in the order of months, depending on complexity. If you have a simpler process, it might take 6 to 8 weeks. Obviously, liquidity is available, you will get a roughly fair price for your assets. But it does take a long time. It is an arduous process. That is one of the things that, at Tap, we’re really trying to clear up and turn that 8 weeks into something more like 8 days, as we automate all these different pieces of the puzzle.

Stewart: I guess, that’s a great point there. How is Tap different than the process you just described?

Jeff: Yeah. I would say, we’re not different. Our model is that we’re thinking about lowering the costs of doing these transactions, making them faster, making them easier. We basically do all the steps that I just described. We just do them faster, and I think that’s what technology is great for. We are armed with the exact same playbook. We have the same teammates. Folks from our team come from Evercore, Campbell Lutyens, these are some of the big banks that are in this area. We happen to focus on transactions that are $100 million and below, though we have transactions that we were doing that are $300 million and above. We do all sizes, but we focus on these more medium-sized transactions, and we have technology and data that underpins every one of these pieces. We arm our advisors with better data about what’s going on in the market.

We have thousands of bids and asks on the platform. We have the majority of the secondaries market looking at deals on Tap. There’s about $250 billion in AUM from secondaries funds that look at deals on Tap. We really have used technology to scale this market in a way that other brokers or advisors can’t do, because they’re doing it in the old-fashioned way using their Rolodex, and their email. We have a transactional platform here that is built to do this at a larger scale, and really built to make the entire process go faster. We have approached the market exactly where it’s at, exactly how it works, and then we are attempting to evolve it from there, using technology.

Stewart: That makes sense. What’s the current state of the secondaries market today? I’m looking at, we talked about why LPs are transacting. Why are GPs transacting, and how much transparency can I get by using Tap?

Jeff: LP secondaries today are doing great. Past couple of years have been amazing, right? There’s been a $100 billion in volume these past couple of years, which are both records. This year is tracking to do $100 billion plus again, and so these markets do well in good markets, because a lot of folks want to buy. And then in markets where a lot of people need to sell, it’s also not bad. There’s definitely a consistency to how this works that has seemed to weather various market conditions. In terms of why GPs are transacting right now is, as you can imagine, private markets, fundraising for private equity, fundraising for venture capital is very difficult right now. There is $3 of demand for allocations for every $1 that LPs have to give, of allocations. What that means is, I think something like 37% of these GPs think that, they describe the current fundraising environment as extremely challenging, and so really for them, what the secondary markets are about is showing distributions in their funds.

They need to show what’s called DPI, which is distributions to paid-in capital. This is one of the top ways they’re judged, in order to fundraise. When they engage in these secondary transactions, generally, they’re able to show DPI, and this helps them in their fundraising. That’s the top reason why they fundraise. Now, as regards to transparency that you’re talking about here, Tap is still a private marketplace, so on Tap, you don’t necessarily see every deal that’s out there. But you’re able to see into, if you have a portfolio of 100 funds, you’re able to see into get pricing on those 100 funds, you’re able to see into see a secondary market adjusted IRRs on those 100 funds. If you have some presence in private markets already, you can come in, and in a private way, view all this secondary market data, and basically very transparently.

Stewart: It’s interesting, because this market, we’ve had some others talking about the value that they see. These are asset management firms, the value that they see in the private secondaries. It seems like this market is rapidly evolving, and rapidly improving. Can you talk a little bit about the future development in the secondaries market from your seat, and how you think Tap is going to play into that?

Jeff: I do agree with the other folks that you had on who were talking about how secondary markets are always evolving. I think that secondary markets are this sort of derivative market of the primaries, which is just fundraising generally. In terms of growth of the market, like I said, $100 billion a year, there are folks who are very reputable who’ve said that in the next several years, we’re going to see a trillion dollars in volume, one of these years. Now, the things that are going to control that are, one, just the growth of private markets overall. As private markets get larger, there’s more secondary transactions that need to happen, right?

The second is the growth of secondaries funds. Right now, like I said, there’s about $400 billion of AUM in secondaries funds. That’s not very much overhang. There’s about something roughly around $200 billion in dry powder, which is only two years of investible capital of that $100 billion pace. And then within that, there’s all little niches that don’t have enough capital at all, and so there really is a big demand to raise more of these funds. As the secondaries funds themselves get bigger, and we bring in other folks who can participate in the secondary side who may not be dedicated secondaries funds, we’ll have more demand for secondaries volume as well.

The third thing I’d say here is that these private programs are becoming more sophisticated, and as they become more sophisticated, they’re going to utilize these portfolio management tools. Perhaps a lot of listeners here have gotten their private markets shop set up in the past decade or so. Well, as they get more mature, and as you see the very large pension funds, and endowments who’ve been doing this forever, those folks are really the folks who are using secondaries markets a lot as an important tool.

The last thing is that the growth in the primaries market is heavily influenced by secondaries markets. Like you were talking about, if insurers want to be able to allocate more into private markets, then we need more liquidity, and so if the market wants to expand into high-net-worth individuals, they need more liquidity. These new frontiers of where private markets could expand, really require liquidity as a crucial aspect of what they’re doing, and so that will also drive demand for liquidity. At Tap, we’re basically trying to make this liquidity a thing. We’re trying to lower transaction costs, and in that way, basically open up the market to new participants, have capital be coming in at a faster pace, and really try and make this future come a little bit faster than it would’ve been without Tap.

Stewart: At the risk of shameless self-promotion, how does somebody find Tap?

Jeff: You can go to It’s You can email our team at Yeah. We’re always happy to chat with folks about secondary markets, just educate folks. This is a new market for a lot of people, like I said, and we’re more than happy to spend our time educating folks on how secondaries markets work, and of course, eventually get you onboarded to get you data, and the transaction done.

Stewart: That’s fantastic. What’s the thing, if you wanted to just leave us with a single takeaway, or factoid, or whatever, what would you want our audience to remember from this podcast?

Jeff: The main thing is that, I think, folks need to remember that these secondary markets make this private market liquid, and so when you get in, you can get out. I think that takes away a lot of the pressure from folks who are thinking of allocating to private markets and think, wow, this fund has a 10-year term. I’m going to be locked-in in this for 10 years. Sure, you should be thinking about being in there for 10 years, but you should know that you’re not going to get killed trying to get out of the market. There are folks out there, like Tap, who can help you navigate these secondary markets successfully, and actually get liquidity on your portfolio.

Stewart: That’s fantastic. I’ve got a couple of questions. You get your choice. You can do either or both. The first one is, what’s the best piece of advice you’ve ever gotten? The second one is, who would you most like to have lunch with alive or dead? It can be a group. You can have up to four at lunch.

Jeff: Up to four at lunch. Oh my God, well, that would be-

Stewart: It’s up to you. Well, including you, you can have you, and three kids.

Jeff: I think, for me, I’m just a huge fan of these biographies of LBJ by Robert A Caro called The Years of Lyndon Johnson. They have sort of a cult following there, this multi-volume, multi-thousand-page set of biographies. He’s a very enigmatic character, and I think it really comes to life in this book. I would absolutely love to have lunch with LBJ, and I guess, I will piggyback off that with a little piece of advice that comes from these books. There’s a bunch of stuff that comes from it. But LBJ used to say that… People used to say, who were with him, that when you were with him, he made you believe that if you did everything, absolutely everything, then you would win. I’ve just seen that over and over again in my life that if you leave no stone unturned, and we see this on transactions that we’re doing now. But on starting companies, or working on anything that you’re working on, if you really go at it full force, and you do not give up, and you keep focusing on dotting every I, and crossing every T, somehow it will work, and it will come to you. That has proven true to me in every part of my life, and I really do take that little piece of wisdom with me everywhere I go in my entrepreneurial journey, in my financial journey.

Stewart: I love that. It’s certainly been true at InsuranceAUM. Right. We’re very fortunate to have-

Jeff: Got to have faith there.

Stewart: Yeah, absolutely. I mean, we’re very fortunate to have terrific clients, and terrific readers, and terrific listeners, and people have been super kind to us, so I’m with you. I think if your nose’s on the grindstone and you just keep going, it’s going to work out. Thanks for joining us. We’ve been joined today by Jeff Leathers, who’s the co-founder and CEO of Tap, an electronic trading platform. You can find them at Jeff, thanks for taking the time.

Jeff: Thanks, Stewart.

Stewart: Thanks for listening. If you have ideas for podcast, please shoot me a note at You can rate us, like us, and review us anywhere you get your podcast shows. My name is Stewart Foley, and this is the podcast.

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Tap is a technology company that is transforming the secondary market for private funds. Combining proprietary data with dedicated capital and world class expertise, the company works with LPs and GPs all over the world to streamline the buying and selling of LP interests in any asset class and of any size. Tap is the largest LP secondaries technology platform with 3,000 bids submitted monthly, $30B in open interest, and a team that has executed $5B across 200+ secondary transactions. Tap is built by a team from firms including Evercore, Bloomberg, Goldman Sachs, Campbell Lutyens, and Carta.

Adam Augusiak-Boro
Head of Capital Markets
+1 332 261 6113
One World Trade Center, Suite 8500, New York, NY 10007

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