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H1 2022 Secondary Market Overview

CATEGORY: Secondary Market Research
DATE: 24 August 2022
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Despite economic and geopolitical headwinds, the secondary market remained healthy in the first half of the year.

Our H1 2022 Secondary Market Overview provides insights on the market trends that have shaped the asset class in the first half of this year. 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.

Volatile public markets, macro-economic headwinds and geopolitical tensions haven't held back secondary market activity in the first half of 2021. First half volumes grew year over year, carried in part by the momentum from a crowded pipeline of transactions at the end of last year and buoyed by LP-led deals that increased their share of the market.

Market sentiment, while cautious, has proven to be relatively positive with respect to the outlook for full-year secondary transaction volume. Buyers, backed by high levels of dry powder, expect that more clarity around interest rates, inflation, recession, and valuations in Q4 will help to lift activity in the second half of 2022.

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Gerald Cooper

Partner & Head of North American Secondaries

"Once referred to as a cottage industry, the secondary market has reached a scale that has proven to be resilient and continues to show momentum."

Key findings for H1 2022 include:

Strong market volumes

First half volumes grew by $3 billion year-over-year, reaching $53 billion, carried in part by the momentum from a crowded pipeline of transactions at the end of last year that spilled into 2022.

GP-led dynamics shift

Sponsor-driven transaction activity has tilted in favor of single-asset continuation funds over multi-asset deals, given a deep supply of high-performing portfolio companies and desire by GPs to hold onto their winners for longer.

Rise in deferred payments

Deferred payments featured in a greater proportion of transactions and comprised a larger share of the purchase price, driven by the greater economic uncertainty, widening bid-ask spreads, and LPs looking to free up capital.

Pricing diverges

Secondary buyers remain hungry for LP portfolios, but pricing decreased year over year with only 16% pricing at or greater than a 5% discount. GP-led prices remained strong with 86% pricing at a 5% discount or better.

Market sentiment remains strong

More than 70% of respondents expect full year 2022 volumes to reach over $100 billion, demonstrating continued confidence in the strength of the asset class by most of its largest and active participants.

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