PGIM is acquiring asset manager Montana Capital Partners, betting that secondary markets will develop across alternative investments, including in real estate, private credit, and other asset classes.
“We’ve watched our clients’ interest in this market grow dramatically,” David Hunt, CEO of PGIM, told II. “The largest sovereign wealth funds, pensions, and endowments have substantial allocations to private equity and real estate, but they’re finding they want to make changes for increased returns and for diversification reasons. But they’re locked in for fairly long periods of time. Now they’re using secondary markets to adjust those exposures.”
Montana Capital is in the private equity secondaries business: The firm buys investors’ existing stakes in private funds, a fast-growing area of alternatives and one that has the potential to transform the industry. By definition, private markets funds aren’t easily bought and sold. But as institutional investors have built large and mature portfolios of alternatives, they increasingly want to sell some stakes and commit the freed-up capital to both secondary and new funds. Investors want the flexibility to restructure their investments, whether to adapt to changing economic conditions or evolving investment objectives.
As part of PGIM’s multi-manager model, Montana Capital will retain its investment autonomy like other shops on the platform. Montana Capital will be able to leverage PGIM to source customized deals from GPs and LPs globally and PGIM will help introduce the firm’s secondaries in Asia. One of the primary benefits for the firm is the ability to use PGIM’s distribution network and relationships with allocators.
Hunt said the deal is part of the asset manager’s much larger strategy to grow its $253 billion alternative investments capabilities, which include strategies from PGIM Fixed Income, PGIM Real Estate – the third largest real estate manager globally – and PGIM Private Capital.
Montana’s entire team, including its two founders, will stay on. “Absolutely they’ll stay on,” Hunt said. They’ll report up to Eric Adler, CEO of PGIM Real Estate.
Hunt said the secondaries markets took off a little more slowly than expected after the financial crisis. But the markets have grown rapidly, in particular, in the last three years.
“They’ve actually become much more widespread,” he said. “It’s not just with large buy-outs, where it was first noticed, it’s now in middle market, real estate, and private credit. We’re seeing the technology behind secondaries spreading across the alternative landscape.”