According to Preqin, 2014 was a record year in terms of the amount of capital raised by private equity secondaries funds. A total of 27 vehicles raised $29bn to purchase investor commitments in other private equity funds, up from $22bn raised in 2013. 2015 is set to reach an all-time high in terms of secondaries transaction volume, following an estimated* $42bn worth of purchases last year. With 67% of managers indicating they will invest more capital in 2015 compared to last year, and a further 27% suggesting they will invest a similar amount, further growth is certainly expected.
Peter Lynch was one of the best growth investors of all time. As the Magellan Fund manager at Fidelity Investments between 1977 and 1990, he averaged a 29.2% annual return. Q1 2021 hedge fund letters, conferences and more The fund manager's investment strategy was straightforward. He wanted to find growth companies and sit on them Read More
Other Key Private Equity Secondary Market Facts:
- Money to Spend: France-based Ardian currently has the highest amount of dry powder (unspent committed capital) for secondaries opportunities, with an estimated $11.1bn.
- New Fundraisings: Lexington Capital Partners VIII is the largest private equity secondaries fund currently in market, with a target size of $8bn. There are a total of 23 secondaries funds currently seeking capital, looking to raise $20bn.
- Debt Usage: 34% of surveyed secondaries managers intend to increase the amount of debt used to finance secondaries transactions in 2015 compared to the previous year. Only 5% of respondents used debt to fund an acquisition last year.
- Most Likely Sellers: Surveyed secondaries fund managers named pension funds (42% of respondents) and banks (36% of respondents) as the investor types that will be looking to sell fund interests in 2015.
- Transaction Types in 2014: Single fund purchases were the most abundant type of secondary transaction in 2014, with 77% of respondents indicating they completed this deal type. This was followed by whole portfolio purchases, named by 60% of secondaries managers.
For more information and analysis, please view the full report via the link here.
“The secondary market for private equity fund interests has grown tremendously over recent years. The market is no longer a last resort for distressed investors seeking liquidity, and now serves as a viable tool for the active management of alternative asset portfolios. A record amount of capital was both raised by secondaries managers in 2014 and also invested in secondary transactions – and this is set to be beaten in 2015.
The majority of managers are looking to invest more capital in secondary opportunities this year, and many are looking to draw on more debt financing to use in the secondary market. The nature of transactions being completed is becoming more sophisticated and innovative to fit the needs of the sellers. We believe that with expanding transaction types and a wealth of capital available, growth in secondary market transactions can only be expected.”
Patrick Adefuye, Manager – Funds of Funds & Secondaries