Six funds raise $5bn, putting Q1-Q3 2017 ahead of previous full-year record

Six private capital secondaries funds reached a final close in Q3 2017, securing a combined $5.4bn. This is a decline in fund closures from Q2, which saw nine vehicles close, but an increase in aggregate capital from the $3.9bn raised last quarter. With robust fundraising in Q3 and record quarterly fundraising in Q1, 2017 has now seen 25 secondaries funds raise a total of $29bn. This matches the previous full-year fundraising record for secondaries funds, set in 2014, with a quarter of the year remaining. As well as seeing strong overall fundraising, the secondaries fundraising market is continuing to diversify and specialize. There are 44 funds in market at the start of Q4 seeking a total of $31bn: of these, 37 are private equity secondaries, five are real estate secondaries and two are infrastructure secondaries vehicles.

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Private Capital Secondaries

Key Private Capital Secondaries Facts:

  • Q3 2017 saw a pickup in fundraising from Q2, with six vehicles securing an aggregate $5.4bn. This compares with nine funds that raised $3.9bn the previous quarter, although Q3 marks the fewest fund closures since Q3 2015.
  • Q1-Q3 2017 has seen 25 secondaries funds raise $29bn, matching 2014’s full-year fundraising record.
  • Eighty-eight percent of secondaries vehicles closed in 2017 so far have met or exceeded their target size.
  • The largest secondaries fund to close in Q3 was the $2.7bn Lexington Middle Market Investors IV.
  • At the start of Q4 2017, there are 44 funds in market seeking $31bn. Of those, there are 37 private equity secondaries, five real estate secondaries and two infrastructure secondaries vehicles.
  • The largest fund in market is Goldman Sachs AIMS Private Equity’s Vintage Fund VII with a target size of $5.0bn.
  • As at the end of September 2017, total private capital secondaries dry powder is at a record $94bn.
  • Less than 2% of secondaries funds currently have negative net IRRs, and the median net IRR across all vintage years is 1.47, surpassing the 1.37 median net IRR for all private capital funds.

Private Capital Secondaries

Patrick Adefuye, Head of Secondaries Products:

“Q1 saw record quarterly fundraising for the private capital secondaries market, so a slowdown in fundraising activity was to be expected in Q2. However, this quarter has reversed immediately, with robust activity in what is traditionally a quieter quarter. As a result, the first three quarters of 2017 have already seen capital totals exceed those in any other prior full year, and with a quarter of the year to go it seems set to extend this record.

Private Capital Secondaries

Beyond the fundraising market, private capital secondaries have continued to see strong performance. Only a small proportion of secondaries funds are delivering a negative net IRR and median net IRRs are higher than for all other private capital fund types. Continued strong performance by secondaries funds could further attract investors to the asset class, and the industry might see increased fundraising levels in coming quarters.”

Private Capital Secondaries

Article by Preqin