By nhoussaine-clareLast updated
With proper income/equity sweep structures, LMM PE can provide yield, shorter duration, increased DPI and reduced reliance on terminal multiple expansion to drive returns versus traditional buy/hold PE.
Key Highlights
Serial LMM Consolidations:
- -Reduced capital duration risk – short contractual holds
- -Increased liquidity – increased capital recycling opportunity
- -Limited reliance on growth – reduced sensitivity to valuations
- -Flexible timing – re-risks market timing window
Traditional Buy/Hold PE:
- -Gating Risk – assets marked to market at single terminal point
- -Capital lock-up – paper returns up to exit
- -Returns highly sensitive to terminal valuation – market/timing risk
- -High duration risk – J-curve provides limited flexibility