2014 Was Record Year For Secondaries Fund Raising: Preqin

By Mani
Updated on

Last year turned out to be a record year for secondaries fund raising, as $29 billion was secured by 27 secondaries funds that reached a final close during the year, notes Preqin.

After surveying over 50 managers of dedicated secondaries assets, Preqin has published a report titled: “Private Equity Secondary Market-Challenging the Illiquidity Myth”.

Secondaries fund managers paint positive outlook for 2015

Enthused by the highest ever annual amount of capital secured, two-thirds of secondaries fund managers surveyed anticipate deploying more capital in the asset class in 2015 compared to the previous year. As set forth in the following graph, a further 27% anticipate maintaining their level of spend in 2015:

According to the Preqin report, managers of secondaries vehicles have large amounts of dry powder at their disposal, which they will be looking to put to work in the year ahead. The following table captures the 10 largest secondaries buyers by estimated dry powder:

Top 10 secondaries fund managers

Interestingly, a growing number of institutional investors are also seeking to acquire fund stakes on the secondary market; over a third of investors that are interested in purchasing fund stakes on the secondary markets are either public or private sector pension funds:

Secondary market buyers by type secondaries fund

Moreover, pension funds have become increasingly comfortable using the secondary market in recent years in order to achieve their desired portfolios:

Active pension funds secondaries fund

More interest in purchasing buyout funds

Focusing its attention towards funds traded, the Preqin report points out that 65% of managers of secondaries funds surveyed indicated that they had purchased interests in buyout funds in 2014:

Increased preference for buyout secondaries fund

Moreover, a third of respondents anticipate expending more on purchasing buyout funds in 2015 than in 2014.

Tracking the transactions involving specific managers and specific fund types, the Preqin report highlights that funds such as Europe-focused buyout funds that trade fairly frequently can be sold relatively quickly on the secondary market as buyers require little to no additional information to offer a price indication:

Frequently traded Europe-focused buyout funds secondaries fund

Collating the transaction types, the report notes single fund purchase was the most common transaction type completed, with 77% of respondents completing a transaction of this sort in 2014:

Transaction types secondaries fund

Underscoring the importance of intermediaries, the Preqin survey highlights that intermediaries represent an important part of the industry, with 61% of survey respondents indicated that 50% or more of the transactions they completed involved an intermediary on the buy side, the sell side or both:

Importance of intermediary secondaries fund

As captured in the following graph, a majority of intermediaries profiled in Preqin’s Secondary Market Monitor are based in Europe, with a further 43% based in North America:

Secondary market intermediaries - By location secondaries fund

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