23 Aug 2017, 3:13 pm
According to a report produced by Credit Suisse, secondary deal volumes were between $13 billion and $15bn for the first half of 2017. The bank estimated that volumes could hit “near-record” levels of between $35bn and $40bn for the full year, after declining from around $40bn in 2015 to $32bn last year.
The report said some recent one-off transactions had traded at premiums of 20-30% above net asset value (NAV), with the median pricing for secondary deals now at 96% of NAV compared to between 91% and 95% during 2016.
The bank said more private equity managers were gaining access to capital through secondary transactions. They were doing this through selling assets or trading out of a fund to enable investors to exit.
Credit Suisse said a third of secondary market transactions were now a result of this hunt for capital, an increase from only 10% five years ago.
Previously the secondary market was used more as a means of exiting distressed companies, but Credit Suisse said these transactions were now commonplace and that sophisticated investors avoiding the secondary market were now “the exception rather than the rule”.
Although volumes were good for the first half of 2017, Credit Suisse noted that with $3 trillion of assets under private management globally, “the market has a lot of room to grow further”.