2022 Secondary Market Overview
The global secondary market had a remarkable 2021, in large part mirroring the exploding primary market.
Our annual report on the global secondaries market provides insight on market dynamics, trends and factors that are shaping the asset class as well as an outlook for 2022. The report is based on proprietary data gathered from a survey sent to more than 100 of the largest and most active secondary participants globally.
Last year’s record-setting levels of secondary investment activity - with transaction volumes hitting $135 billion - came at a time of high primary market valuations, healthy distributions, and GPs more rapidly raising new and larger size funds.
Both LP and GP-led transaction volumes grew their share of the market at the expense of preferred and secondary direct transactions. Pricing was strong for both, which was a contrast to the pandemic-shocked market in 2020.
As we move into 2022, the global economic landscape is looking very different from last year: inflation is on the increase, public markets are more volatile, regulatory headwinds appear to be approaching, and geopolitical tensions are escalating. Against this backdrop, we believe conditions are aligned for LP-led sales momentum to accelerate and primary stapled secondary transactions to become more widely employed, among other trends.
Key findings for 2021 include:
Record transaction volumes
Transaction volume experienced a significant year-over-year growth of 125%, hitting $135 billion. This all-time high level of market activity was experienced across all transaction types and sizes, as well as the average number of deals closed by secondary buyers.
Continued rise of GP-led continuation funds
Nearly 90% of the roughly $60 billion of GP-led transactions in 2021 were multi-asset or single-asset continuation funds, which compared to just over $20 billion in 2020.
Massive rebound in LP-led transactions
At $63 billion in volume, LP-led transactions were over twice the level seen in 2020, with over half of these transactions priced at or better than a 5% discount to NAV — double the proportion in 2020.
Buyers demonstrate preference for younger assets
Approximately 70% of the transaction volume in the GP-led market involved companies that were six years or younger, with almost one-third of that involving companies that were three years or younger.
Meaningful increase in target returns
Buyer target returns have been historically stable, but survey responses show a material increase in target IRRs for single-asset transactions of approximately 2% and about .20x for required money multiples.