Investors Bullish On PE Secondaries

Mar 21 2013 | 9:52am ET

More than half (53%) of the investors polled by Preqin for its latest private equity report believe the secondary market is “of core or growing importance” to their p.e. portfolios.

The survey was based on analysis of secondaries transactions, pricing, buyer and seller appetite, and fund-raising conditions as well as interviews conducted with over 40 institutional investors worldwide in March 2013.

Preqin found that 45% of the funds sold on the p.e. secondaries market in 2012 were boom-year vintages (2006-2008) that had underperformed.

The survey also revealed that 43% of LPs expect secondary market activity to increase in 2013 while 55% expect it to match 2012 levels.

Public and private sector pension funds account for 25% of potential secondary market sellers, followed by banks (12%)  and insurance companies (9%).

Of those LPs looking to sell fund interests on the secondary market, 66% plan to exit buyout funds.

A full 67% of investors interviewed in March 2013 (up from 50% in March 2011) were motivated to buy assets on the secondary market by the opportunity to purchase fund interests at a discount to NAV.

Secondaries funds that closed in 2012 raised an aggregate $21 billion, almost double the amount raised by funds that closed in 2011. The average secondary fund last year was $1.4 billion, compared to a 2011 average of $596 million.

AXA Private Equity closed the largest secondaries fund ever  raised in June 2012, with AXA Secondary Fund V attracting $7.1 billion from investors. Dover Street VIII is the largest secondaries fund in market by target size, which had already raised $3.1 billion by November 2012, beating its target of $3 billion.

“The vast majority of investors in private equity expect secondary market activity to match or exceed the high levels witnessed in 2012,” said Preqin marketing analyst Patrick Adefuye, in a statement.

“Institutional investors under pressure to conform to new regulations will likely bring portfolios of fund interests to the market, along with non-distressed sellers that increasingly view the secondary market as a portfolio consolidation tool. A bumper year for secondaries fund-raising means a large amount of capital is available to deploy among specialized secondaries players. Coupled with a considerable 72% of institutional investors that stated it was either a possibility or highly likely that they would purchase fund interests on the secondary market over the next two years, this indicates 2013 is set to be a strong year for private equity secondary market activity.”


In Depth

Part II: Roubini Talks Risk, Recovery And The Threat Of A Triple Dip Recession

Oct 21 2014 | 12:41pm ET

In the second half of our interview with Nouriel Roubini, FINalternatives editor...

Lifestyle

Balyasny Pays Over $6M For Lakefront House

Oct 22 2014 | 10:29am ET

A venture headed by hedge fund manager Dmitry Balyasny just paid $6.2 million for...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Demeter: Family affair

David and James Hamman launched their fundamental Livestock and Grains Program in March of 2010 but it really was decades in the making.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.