Scale Constraints Favor Small Specialists
Ani Banerjee, co-founder of Andromeda Group, on secondary diligence and companies staying private
This is really a scale problem, not just a skill problem. Small funds can buy odd lots, sit through volatility, and spend weeks piecing together sparse information on one company. Large funds usually cannot. Once a fund gets very big, each position has to absorb much more capital, fit tighter risk rules, and show smoother short term marks, which pushes it toward broad, liquid opportunities instead of niche late stage secondaries or other messy private deals.
-
In late stage private secondaries, access is often block by block and relationship driven. Buyers may need founder approval, a ROFR waiver, and enough conviction to underwrite with limited data. That favors smaller specialists that can move opportunistically on unusual situations.
-
Large pools of capital face a position sizing problem. If a fund needs to put tens or hundreds of millions to work, a quirky $5 million or $15 million secondary block is not worth the effort, even if the return is attractive. Smaller managers can make those trades matter.
-
The same dynamic shows up across private markets. As companies stay private longer and secondary liquidity grows, there is more room for investors focused on cap table cleanup, employee liquidity, or selective late stage common stock, while giant funds gravitate to standardized rounds and broad exposure.
As private markets keep deepening, more of the alpha will sit in these narrow pockets where speed, relationships, and comfort with imperfect information matter more than raw capital. That should keep creating room for small specialist funds, even as the largest managers capture the more standardized, high volume part of the market.