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2017 Secondary Market Overview

CATEGORY: Secondary Market Research
DATE: 16 January 2017

We provide insight on market dynamics, trends and factors that are shaping the asset class.

Our analysis is based on proprietary data and survey responses from more than 55 of the largest and most active secondary funds in the world.

Despite record levels of dry powder, it is clear from the amount of capital raised last year that investors still have confidence in the long-term performance of the asset class and on a risk-adjusted basis the secondary market can provide superior returns to other asset classes. The growing trend of secondary funds selling assets in the market should provide confidence to other LPs that there are win-win deals and the secondary market can be an attractive tool for active portfolio management.

Key findings include:

Continued strong conditions for sellers:

The average pricing for Campbell Lutyens transactions completed over the past 12 months was 94.3% of NAV, signallingsignaling a very favorable sellers market, where 74% of our respondents consider pricing to be expensive.

Increased use of leverage to boost returns:

An increasing number of buyers, both large and small are using leverage to compete in the current environment, with lenders providing compelling interest rates and more flexible terms.

Greater focus on unconventional deal flow:

More complex and concentrated transactions will be successfully executed as buyers try to target less competitive deals – 36% of our respondents sight the market as being highly competitive.

Wider acceptance of GP-led transactions:

GPs are becoming more proactive around the use of the secondary market to provide optionality to their LPs – 44% of our secondary buyer respondents will dedicate more time to GP initiated secondaries transactions.

Stronger demand for European exposure:

European transaction volumes have been depressed and consequently appetite for the region has increased with about one-third of our respondents seeking to increase exposure.