YouSaid · the spoken record

Jon Madorsky

lines on the record: 74
first: 2025-05-29
most recent: 2025-05-29
sittings or episodes: 1
sources: podcast

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“Hope is it's mentorship. I'm 52, so when you get to that point, you start thanking a little bit more about the next mountain or the next chapter. For me, it's curating this idea of mentorship of all of the people that are in my life that have less experience than I do so that I can help them understand my victories and my failures, my strengths and my weaknesses so that they can be better people. And ultimately, a lot of that mentoring is organizationally at my firm as people are progressing and we're giving them opportunity for generational transfer, giving them opportunity to grow. If I can help them grow, that'll be really rewarding.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is a level of transparency and vulnerability that we all have with each other. So life happens, death divorce, marriage, whatever it happens to be. Within my partnership base, we always alert each other of these issues so that it gives us space to live a life as well. And as a result, we've been able to be immensely stable. My partners aren't my best friends, but they're my partners and they've allowed me to evolve into the person I am today, which I'm really grateful to them for.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Been at RCP for 21 years. It's incredible for me to think that I've been there that long and I'm that old. But when I think about two people, it's not two. It's five. It's my partner's. We have two really interesting foundational elements of my partners that have allowed me to grow so much. One is we're all very different. If we were to take a Myers-Briggs test, we would be across the entire continuum through each one. I've learned one would be how to better open myself up for relationships. One would be how to not necessarily believe that there's an absolute truth from one would be diplomacy, which is a really tough one. And then one is critical thinking. All my partners have allowed me to evolve because we're so different. The other piece of it is we've been together a really long time and we've been stable. And I think rooted in that stability.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“I am either cursed or lucky with a deep love of cars. It started out with my dad. My dad is a car guy and some of my earliest memories are with him sitting next to him in a car, but all the cars have changed. I have that same bug. I like vintage cars. I like to fix vintage cars. I like to understand them. I like to repair them. And then usually when they're perfect, I often sell them. Just the whole process is really rewarding to me. The other piece when you work on a car or when you drive a car, you're so present. There's no space for noise of work or no space for noise of family. You just have to be there. And recently I started racing cars as well. And when you're on a track, you can only look at one thing, which is one or two turns ahead of you. And just to have that cathartic experience of a quiet brain. Is a really special thing.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is really interesting and getting that reporting not on a quarterly basis like all of ours do today, but on a daily basis might manifest in a pretty quick way.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our ability to proactively target assets that we're really trying to go after will only grow and allow our business to grow. If we go back to this idea of index actively managed and hedge fund corollary, to some extent maybe returns will come down on the latter side of it. What is a retail investor expect? I have a Schwab account. I can open up my Schwab account and I can see how much my portfolio is held at today and how much volatility I had over the past three days. I think some of those reporting mechanisms are probably going to be expected by a lot of our limited partners, especially the retail community, will push that idea in a pretty acute way. So it's going to move to a business of customer service as much as investing. And that customer service, going back to Schwab, the technology stack that has”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Being involved in a maturing industry is chaotic. It's like a startup. We're changing and the rules are evolving. And the pace of evolution that we've seen over the past 15 years is incredible. Are we going to continue to see that pace of evolution over the next 15 years? Maybe, but at the same time, I think the pacing will slow down a little bit. So something that excites me is really the ability to refine and not just react as quickly. What does that mean? I think in terms of the ability to like source steel flow, thinking about sourcing deal flow on a more proactive basis, the adoption of people opportunistically selling is probably going to be really interesting. Now there's not a general acceptance of this being a high volume liquid market like the public markets are. If we could get a little bit more liquidity, have that turnover rate go to 4% or 5%.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Having that transparency of understanding that we're getting something fair is the way that we have sustainability in our strategy and our market.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right, from a negotiating perspective, putting pressure on people is an uncomfortable feeling buyer saying we're only going to buy all of this, even though you might not want to sell all of this or you have two days to make a decision. Those are all levers that I get. And you can certainly push that tactic through. But my assumption is that a LP that is selling into a high-pressured environment is probably not feeling very good after the transaction. That would probably be the biggest thing that we see on the CV side. Sometimes when there's not necessarily a transparent process is a little bit discerning for limited partners, was an investment bank hired? I think an investment bank should be hired. Should multiple people be bidding on this position? Or should the market price be set in a certain way?”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think the secondary buyers always need to have the secondary sellers feel like they're not getting taken advantage of. For us, it's transparency. Even when we're buying a position and we're negotiating with or against a limited partner that's selling, we tried to articulate that there is value in the portfolio. And the hope is that the selling air recognized that we have to have a return profile. They can't feel like they're getting their faces ripped off. It just isn't a sustainable business model. And the same is true on GPLEDs for us to be transparent with the sellers about why we're landing on values, what the expectations are, what the return profiles are, will allow people to continue to want to sell into this market. I hate using this term, but a win-win. And that's where we really have to land in order to have that sustainability. We can't just be like,”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“When we first started our secondary practice, we were thinking a little bit on how long do private equity positions stay alive for? And we did some research or some public information from larger pensions and endowments. And it was shocking. It's not 10 years the life of a fund. It's not 12 years the life of the fund plus the two-year extensions. It's 15 to 18 years. We want to complete our investment over a specific time horizon. Let's call it 10 to 12 years. Beginning in year nine of our fun life, we begin actively evaluating our portfolio and deciding which to go back into the secondary market to resell. And we will curate portfolios that are going to be large enough that they'll attract a lot of buyers and consistently almost on a yearly cadence liquidate position so that our funds do have a terminal. Life of 12 years”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“So we can try and advantage ourselves in every way. Going back to that matrix of how we should be thinking about the market and how people are driving value, that is one of the main differentiators we have is a focus on lower middle market and a relationship with these GPs in a really acute way.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“That is something that we advertise on our foreheads. Look, the secondary market is efficient. There's an intermediary involved, and our job is to try and disintermediate some of the intermediation. And if we can be a preferential buyer, it allows us to do just that. So we get to drive deal flow because the GPs are going to be viewing us as a potential limited partner. When we're sourcing, the secondary world is a small universe and we're all frenemies. I have a deep level of love for them, but also being a frenemy when we're competing and we're trying to drive deal flow, we will try and execute anything that we have in our quiver to be able to get that. So we're selling against secondary players that don't have a primary pool of capital.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“In one year, that's a very successful transaction. It also allows them to hold their very best transactions to continue to drive ROIC. So when you look at like the behavior Investment at a point in time and hopefully an exit at a point in time three to five years later. Having that blending is something that our LPs really appreciate.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“As a result, the J curve is even more muted because we can write it up to the NAV at acquisition. The multi-asset GP-led transactions will have a fan of distributions. And what's interesting about the multi-asset transactions is historically in private equity, just on the principal investing side, managers had sold their best companies very early and got stuck with their worst companies. They cut their flowers and watered their weeds. But in a multi-asset GP-led transaction, we afford the availability and we push GPs to get rid of those weaker performing assets. Because all of the assets are getting reset at a price and all of the economics are getting reset, if the GP sells, they're underperforming asset in year one or year two only returning 1.5 or 1.8 times.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Portfolio is bifurcated in the LP positions and the GP led positions. There's even two types of GP-led transactions that occur today. One is a single asset and one is a multi-asset transaction. Now we have three different types of transactions. We have LP positions, GP-led, multi-asset positions or diversified portfolios, and GP-led single asset positions. And each behaves very differently from a cash flow perspective, and each behaves very differently from a ROIC or MOIC perspective. When we're building our portfolio, we want to blend of all three of these because when you think about the combination of all of them, they're highly complementary to each other. Let's start off on the most liquid part of it, which is the limited partnership or LP secondaries tend to return capital quicker. Additionally, there's a discount involved in many of the limited partnership positions.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Go through this whole exercise of data collection and looking at all the sourcing and trying to figure out what you want to own. How do you then think about the portfolio construction and management of your portfolios?”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Scenario position versus the best case scenario position because if we take the worst case scenario position and we're wrong, we're right. And if we take the best case scenario position and we're wrong, we're very wrong. As a result, I think a lot of the construction that you would think to have around volatile market, which we're in today, is being inserted into all of our assumptions”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“When Leverage was less expensive, the capital intensive businesses were a little bit more easily digested buy-in builds, where today the construct of a buy-in build is a little bit more difficult because leverage is so expensive. When we think about our portfolio and how it's evolved, it hasn't course corrected. It hasn't changed wholesale, but it feels like many of the deals that we're doing today are less capital intensive businesses that have been able to grow organically and also have a high level of free cash flow yielding off of them. With the market, are we in a recession? Are we going into a recession? Are we in a trade war? Are we going into a trade war? I don't know. And I don't think anybody knows. But the market prices that with that in mind. When we're looking at a transaction today, we have to take the worst case.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Buy those positions because there's not a historical model, there's not a historical knowledge, but for us, we know that. So the moats that we have in place, which is our specific strategy, I think is defensible, both with the 40-ac funds specialists, with large players coming in. But our markets are evolving, and I don't think that we can stick our head in the sand and say we should not or we cannot evolve with the market.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our focus of lower middle market has a lot of moats around it. We have these relationships with the GPs. If it's a GP-led transaction, we'll either lead a transaction or be a syndicate player. And for us, there is no economic difference in being a syndicate player nor a lead player that has evolved though where being a syndicate player used to get a full allocation regardless of your position in your relationship with the GPs. Today it's probably a little bit more difficult, but we still feel really confident in that idea. Another moat is just the quantum of GPs that we're targeting. There's no such thing as off-the-shelf pricing for small to middle market manager in Chicago. But we have that relationship with them so we can price them very quickly. If you're a larger GP, it's difficult to”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Finally, is we're starting to see typical private equity general partners enter into our space. If I were them, I would be thinking, I'm losing transactions through continuation vehicles, so let me get into the GP-led space. A couple of them have already announced that they're raising funds, whether that's Leonard Green, Advoc, New Mountain, and then a couple are quietly poking into the background. What's interesting is all of those folks are mostly focused on the GP-led volume versus the LP-led volume. What we're seeing is a further specialization in the market where maybe the LP-led volume will be consumed by LP-led focused people, where the GP-led transactions will be more focused on some of the GP-led specialists as well.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm smiling because very often we get the exact opposite question, which is, is there too much capital in the market chasing secondary transactions? And here we are talking about the idea of is there enough capital in the secondary market to satiate the supply. It's a very valid question. We've seen the market grow from active buyers, which is my side on it, both in terms of people raising more and more capital, so bigger fund sizes. In 2010, of the top 10 biggest private equity firms globally, one or two of them were secondary players. If you look at it today, it's a handful or more, meaning secondary players are raising much bigger funds. And as a result, that is one of the components that's going to be able to satisfy the supply. Secondly, we're seeing new entrants into the market with the Forti Act funds.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, if you look at the industry as a whole, it's clear that there's an increase in the supply of partnership interests that will drive that 1.5% to 4% or 5%. I'm curious where you see the demand for that secondary activity coming from.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Continues to pressure the market, that will continue to drive volume. Do we have space for all? Yeah, we could very easily see all of the secondary volume get to 400, $600 billion. I have a good friend in our space and we call him the trillion dollar man because he thinks it's going to be a trillion dollars. Maybe, but I don't know when.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let's imagine a scenario where the total volume goes to 2.5% or 3% or 4%. You can very quickly see our market doubling or tripling or quadrupling. I think that's going to drive a lot of the volume that we're seeing in the secondary market along with the idea that liquidity in our market over the past couple years has changed in terms of duration. When we first started the average assumption on a company being held in a portfolio was four and a half to five and a half years. I think today that same assumption is probably six years plus. And you've seen it with some institutional reporting coming out where the amount of liquidity that limited partners are getting on a yearly basis has come from a number of 15 to 20 percent of their total commitments every year returning back to 10% or maybe even lower. So as liquidity continues”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Think fundamentally, your question is around growth of our space. And let's say in 2025, expected secondary volume is $190 billion, plus or minus. That represents a percentage of the total amount of NAV that is in alternatives in general. Historically, that ratio, which has been the total volume over the total amount of NAV has been about one to one and a half percent”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Curious position of the Fortiac channel clearly growing at the same time you have now potentially real bellwether announcements of secondary sales at Yale and Harvard. Where do you see that shake out? It's the institutional market maybe is saturated or oversaturated. The same time that there's this new channel of money coming in.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Investment bankers would claim that the 40-act funds are paying anywhere between $200 and $500 basis points more than a typical fund. So it's putting pressure on the pricing. What we're really looking for is there's some folks that are 40X fund exclusively. There are some folks that have a 40-X fund that runs in parallel with their core fund. And then there's some folks that don't have a 40-act fund at all. My expectation is the people that have a 40-act fund and a core fund are probably not putting as much pressure in the pricing as just the pure 40 act funds are because their model's a little bit different. They have to have the same return profile on both of their products.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Hedge funds or specialized managers that are tapping into a more institutionalized limited partnership charge a little bit more and probably have an expectation of a greater return profile. What they lack is the ability to scale like an index fund. That's the trade. And within the private equity world, if I can draw that same corollary, managers that stay in this highly specialized space will be smaller. We'll have a deep level of specialization, charge a little bit more, but force them to also have better returns. I can go on the same continuum of the full retail product, which would be like an index fund, which would be lower return profile, but lower fees as well.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“An interesting question is what happens in the next 10 years? Going back to my history major roots, let's point to the public equities, which was your specialty. I can imagine a space where private equity looks a little bit like the public equity manager market does today, where you have some people that are focused on almost like an index. That would be a pure retail product. Then you will have some folks that are charging a little bit more that will be specialized in what's called that in the public equities world, an active managed portfolio. And then you'll have some boutique managers that will be focused on the more historical institutional investor base, and let's call that the hedge funds of today. There's a good argument for private equity pushing into that as we see that democratization of private equity in the retail space.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“40 act funds or the retail market has influxed into the secondary space. 24 was the year of the retail capital. And it's amazing how much capital has been raised from that avenue. Institutional capital has historically been pretty stable and maybe the addressable market is fully satiated. So as managers are looking to raise more capital, this is a greenfield TAM, if you will. The structure of a Forty Act fund or an evergreen fund is they call all the capital at once right off the bat. And as a result, the managers have to invest that capital very quickly, which is why we pushed into the secondary space. When we've seen a lot of the larger portfolios and even a lot of the limited partnership positions trade in 2024, the retail funds have been the main connoisseur of this product.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“In terms of the fan of outcomes, it's still a little bit young to think through where the ultimate outcomes are going to be. We've been hit broadly with a less liquid market on the exit horizon as well. So combining younger or less mature assets from a GP-led perspective, as well as a tighter liquidity market, I think the ultimate outcome of a lot of the CVs is still unknown”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“The secondary market has evolved in the same way that styles and strategies have. We want to make sure that this is a high quality asset and that it's de-risked. More specifically, we want to make sure that there's a good reason for the GP-led transaction to occur. It's not just to get liquidity, which we feel would be misaligned. Have they held on to it for a long enough period that it's time to sell? Has it appreciated enough? Do they need more capital to do further add-on acquisitions? Or do they need more time on a hold period because maybe the management team is new? We want to make sure that the GP-led transaction we're buying, the go forward strategy is a continuation of the historical strategy so it's been largely de-risked.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“So rather than saying we don't feel like we're getting top dollar, I think a lot of limited partners moved into the construct of saying we're happy for the liquidity”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“As a primary investor and as a secondary investor, we were a two-horned hat, if you will. My partners that are more focused on the primary side feel like the alignment in terms of the valuation is something that they think a lot about. And for us on the secondary side, alignment in terms of the next phase of this investment is something we think a lot about. In 2021, that was a much more poignant topic. GPs could go into the market and possibly sell these transactions. Were GPs getting top dollar? It always felt like as a buyer they were, but always felt like as a seller they weren't. And it's sort of like the old thing. Both sides are unhappy that maybe that's the middle point. But beginning in 2022, where liquidity really dried up in the market, limited partners recognized.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Delta between the heaviest user of AI and the most of the market is narrowing on a day-to-day basis because AI is getting a lot easier to use.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“If I'm looking in the future, AI's got a really powerful place in our market. I think historically it has been less so, and we haven't seen it fully manifest yet. Right now, even the data ingestion is a cumbersome task using AI because each of the individual metrics, each of the individual company specific reporting ideas is in a different spot. Right now, we're still working through like the data ingestion piece of it. And we also use it for maybe a qualitative tear sheets. But in three years, certainly AI will be able to create a first or second run at our models, but might not be able to fine-tune or drive a lot of the assumptions that we need the qualitative rich data that we're collecting, but to actually create and populate the Excel model is something that I can absolutely imagine AI using. And I know some people say they're using it pretty robustly today.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Everything in between. We're collecting all of that data so we can start collecting metrics like EBITDA, revenue, net debt, purchase price multiples on every single company. And we can use that to build a bottoms-up model. I hope everybody's listened to my colleague and partner Alex Abella's podcast because he talked a lot about the data, but that data gives us the advantage to be able to underwrite everything from the bottoms up. The other lever that we pull is relationships with the general partner. We're going to be talking to both the GPs that own these specific portfolio companies, as well as GPs that own comparable portfolio companies to be able to understand the headwinds and the tailwinds of the individual industries, of the individual companies, exit multiples, market appetite. So at the end, when you're thinking about this entire valuation element of when we land, it's literally a valuation of”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Critical piece of our strategy is that we're not buying entire portfolios. We're not buying portfolios of 40 funds or 50 funds. Typically, we're buying on an LP interest a single fund, so it might have five or six companies, or maybe two funds, maybe three. As a result, the quantum of number of companies that we have to underwrite or review is much more narrow than if we're buying a thousand different companies. So we have the luxury slash benefit of being able to do effectively like a knockdown LBO model for every single company. To do that, you need two things. You need data and you need the qualitative information. So on the data side, because we're a primary fund, we're constantly collecting and meeting managers when they're raising capital, when they're issuing data rooms, when they're coming to our offices just to say hello at annual meetings.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then absolute is around this team strategy and track record framework. Effectively, if we can start seeing a cadence in their transactions, a cadence in their deals, a rhythm, if you will, then we feel like it's repeatable.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Our roots are a primary investment manager. If you think about RCP, many would say a primary investment shop with a secondary and co-investment funds. And that's what we like. We want to appear like that in the market. It provides a lot of advantages. But having the roots of being a primary manager allows us to assess the construct of team strategy and track record, which we're thinking about in any primary investment. And it also gives us the luxury of knowing these GPs for a very long time. So instead of trying to educate ourselves for the first time on a GP that we're seeing because it's a small market manager, these are folks that we have tracked and followed since their own inception. The manager quality element is relative and absolute, but we have that relative capability because we track the entire landscape of managers.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“There's this idea of when to be a purchaser. A lot of our contemporaries have done very well being tail end buyers, managers that buy secondary positions at the end of their life. Typically, you're going to see a lot of the value that those folks are getting just through the discounts that they're obtaining. We felt like because we were trying to target a higher quality manager and the market was fairly efficient, we're Chicago people, so we believe in an efficient market. We didn't want to necessarily play in the tail end position. So therefore, we reset our filter so that we would only be buying positions that are a little bit earlier in their life cycle.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“The two biggest learnings that we had would be first manager quality. When we did our first secondary fund, we did really well. One thing we didn't have a clear grasp on though was this constructive manager quality. Specifically, pressure on returns if manager quality was low. So when we invested our second fund, we were thinking we like the asset quality and we were a little bit less tuned in on the manager quality. The way I would define manager quality could be did they have a subsequent fund being raised. When our second fund, which at this point is a 2013 vintage fund, we had a number of managers that weren't able to raise subsequent funds and the performance of the underlying secondaries that we held suffered as well. That would be something that we tuned into very clearly beginning in 2017-18. The other piece of”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then it flattens out that total value, or even degradates down. Some folks will buy tail end positions. We're not a good tail end position buyer. We want to be able to identify the value before it hits that inflection point to get our returns. So much so that when you deconstruct our returns, And then the last piece is price, obviously. So to wrap all of that up in a tighter bow would be good market, good managers, at the right point in time with a good price.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Businesses or have underperformed significantly over a long period of time, those are managers will back away from. The third element in our algorithm would be good assets. Everybody would say we want good assets, but maybe not in today's world. Some people would say we don't mind if the asset quality is softer. We'll just price that in. For us, we want a good quality asset. The fourth part is buying at the right point of the inflection of the value. Let's say T0 is when a fund began. T10 or 12 or 15 is when a fund ends, and you plot out the ROICs, typically the slope of the return is going to be pretty moderated up until year five or six. Let's call it 1.2, 1.3, 1.4. Then it hits a pretty significant inflection point when you start seeing realizations and you start seeing portfolios appreciate through years, let's call it nine.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Strategic algorithm, which has been refined both through successes and failures, today is pretty tightly defined. If I could think of this as filters. The first would be a focus on North American lower middle market buyout. This is the market that we play in exclusively. As a result of playing in that market exclusively, we know the 1000 plus general partners intimately. We're collecting data on those partners in a very regular cadence. So that gives us a lot of advantages both in terms of sourcing and diligence. We also have the benefit that lower middle market using prequin data that's historically outperformed all the other sub-asset classes. We have a little bit of wind at our back. Once it gets through that North American small market buyout focus, which is for us, managers under a billion dollars in size, the nexus manager quality. For us, this is really important if we see managers that are either winding down their”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“If you look at the value creation piece in the old days, if it was all distressed sales, assume you'd think the purchase is an important part of the value creation, you could think about what you own, the underlying asset or the GP. With all those different styles, what do you think works best for creating value?”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Stable returns. Lastly, just a differentiated piece amongst the entire category of alternative assets. We went from a piece of private equity to maybe being an entirely different sub-asset class.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source
“Advantage in sourcing, deal flow, and diligence in that deal flow. Some people feel like their values that they could do very big transactions that most people can't do. Some people feel like their value is maybe buying more complex transactions that some people do not want to do. Understanding that framework really is the foundation for identifying our market is maturing. Once we land into that idea, then we can approach how do LPs want to use this market. If I go back in 2010, people thought it was an IRR investment. Get capital backed very quickly, establish a beachhead in private equity, and then supplement that with a primary portfolio going forward. Again, today's world, secondaries is a complete asset class in itself, and people use it as a position in their portfolio. People use it, yes, for the quicker return of capital. People use it on the GP-led side for return profile and good assets.”
2025-05-29 · Capital Allocators · Jon Madorsky – Navigating the Evolution of Private Equity Secondaries (EP.448) · IDENTIFIED FROM THE TRANSCRIPT · source