Private capital secondary market set for growth
April 12, 2018

Private capital secondary fund managers expect the total size of the sector to grow in 2018. Following a record year for private capital secondary transaction and fundraising activity in 2017, it is unsurprising that the majority of fund managers are optimistic for the year ahead.

Q1 2018 lags behind Q1 2017's fundraising levels, with five funds securing US$4.7 billion compared to 11 funds that secured $20 billion, but the largest proportion of fund managers surveyed (41 percent) expect the total value of deals in the secondary market to reach $45 billion or more in 2018. This could make the year the most active ever for secondary transactions.

Additionally, the majority (60 percent) of fund managers expect to invest more in 2018 than they did in 2017. Secondary fund managers' positive outlook for the year comes as median performance for secondary funds exceeds that of all other private capital sectors among vintage years 2009-2015.

Christopher Elvin, Head of Private Equity Products at Preqin, said: "2017 was a record year for the private capital secondary market, as it saw both fundraising and transaction values reach record highs. As the industry continues to gain prominence and break records, perception around the secondary market has improved vastly and fund managers are feeling especially optimistic about 2018.

"Despite Q1 seeing less fundraising activity than the year before, all the vehicles that did close managed to exceed their target size. This speaks to the strong appetite investors have for the market, and will give confidence to those fund managers currently seeking capital – including those seeking to raise the largest secondaries fund ever.

"In part, increased investor appetite may be due to the changing perception surrounding the private capital secondary market. Once a tool used primarily by investors in challenging circumstances, secondary transactions are becoming a core component of active portfolio management for many investors, and fund managers are engaging in larger and more complicated transaction structures to meet that need.

"At the same time, the returns offered by secondaries vehicles stand out even among other high-performing private capital strategies, and it may be this as much as anything that gives fund managers confidence that the industry is set to grow further over the coming year."





This site, like many others, uses small files called cookies to customize your experience. Cookies appear to be blocked on this browser. Please consider allowing cookies so that you can enjoy more content across fundservices.net.

How do I enable cookies in my browser?

Internet Explorer
1. Click the Tools button (or press ALT and T on the keyboard), and then click Internet Options.
2. Click the Privacy tab
3. Move the slider away from 'Block all cookies' to a setting you're comfortable with.

Firefox
1. At the top of the Firefox window, click on the Tools menu and select Options...
2. Select the Privacy panel.
3. Set Firefox will: to Use custom settings for history.
4. Make sure Accept cookies from sites is selected.

Safari Browser
1. Click Safari icon in Menu Bar
2. Click Preferences (gear icon)
3. Click Security icon
4. Accept cookies: select Radio button "only from sites I visit"

Chrome
1. Click the menu icon to the right of the address bar (looks like 3 lines)
2. Click Settings
3. Click the "Show advanced settings" tab at the bottom
4. Click the "Content settings..." button in the Privacy section
5. At the top under Cookies make sure it is set to "Allow local data to be set (recommended)"

Opera
1. Click the red O button in the upper left hand corner
2. Select Settings -> Preferences
3. Select the Advanced Tab
4. Select Cookies in the list on the left side
5. Set it to "Accept cookies" or "Accept cookies only from the sites I visit"
6. Click OK

Private capital secondary fund managers expect the total size of the sector to grow in 2018. Following a record year for private capital secondary transaction and fundraising activity in 2017, it is unsurprising that the majority of fund managers are optimistic for the year ahead.

Q1 2018 lags behind Q1 2017's fundraising levels, with five funds securing US$4.7 billion compared to 11 funds that secured $20 billion, but the largest proportion of fund managers surveyed (41 percent) expect the total value of deals in the secondary market to reach $45 billion or more in 2018. This could make the year the most active ever for secondary transactions.

Additionally, the majority (60 percent) of fund managers expect to invest more in 2018 than they did in 2017. Secondary fund managers' positive outlook for the year comes as median performance for secondary funds exceeds that of all other private capital sectors among vintage years 2009-2015.

Christopher Elvin, Head of Private Equity Products at Preqin, said: "2017 was a record year for the private capital secondary market, as it saw both fundraising and transaction values reach record highs. As the industry continues to gain prominence and break records, perception around the secondary market has improved vastly and fund managers are feeling especially optimistic about 2018.

"Despite Q1 seeing less fundraising activity than the year before, all the vehicles that did close managed to exceed their target size. This speaks to the strong appetite investors have for the market, and will give confidence to those fund managers currently seeking capital – including those seeking to raise the largest secondaries fund ever.

"In part, increased investor appetite may be due to the changing perception surrounding the private capital secondary market. Once a tool used primarily by investors in challenging circumstances, secondary transactions are becoming a core component of active portfolio management for many investors, and fund managers are engaging in larger and more complicated transaction structures to meet that need.

"At the same time, the returns offered by secondaries vehicles stand out even among other high-performing private capital strategies, and it may be this as much as anything that gives fund managers confidence that the industry is set to grow further over the coming year."



Free subscription - selected news and optional newsletter
Premium subscription
  • All latest news
  • Latest special reports
  • Your choice of newsletter timing and topics
Full-access magazine subscription
  • 7-year archive of news
  • All past special reports
  • Newsletter with your choice of timing and topics
  • Access to more content across the site

More on:  Asset management