2019 Secondary Market Overview
Category: Secondary Market Research Year: 2019
11 April 2019
Strong buyer appetite and compelling market dynamics for sellers point to continued innovation in the asset class
Campbell Lutyens has published its annual report on the global secondaries market, providing insight on current market dynamics and outlook for 2019. The report is based on proprietary data and survey responses from more than 60 of the largest and most active secondary fund globally.
Despite volatile public markets and an uncertain global macroeconomic backdrop, secondary activity was robust in 2018. Transaction volumes reached an all-time high of $73 billion, up by approximately 45% over 2017. The market’s capacity for large deals was put to the test and the second half of the year proved to be particularly strong with at least eight billion-dollar-plus transactions successfully signed.
“The transaction pipeline for 2019 continues to build momentum and all signs point to a year that could eclipse 2018,” said Gerald Cooper, Partner. “With the broad acceptance of GP-led deals, innovation in the asset class will come in the form of strategy specialisation and more complex transactions.”
Key findings include:
Transaction activity was driven by large public pension funds
Approximately 32% of the limited partnership sales in 2018 were from public pension funds, compared to 23% in 2017. LP-led sales from public pension funds grew by almost $12 billion from 2017 to 2018.
Significantly more capital allocated to a fewer number of secondary funds
While not a record year for fundraising, total dollars raised in 2018 was $46 billion, with eight secondary buyers accounting for 70% of the capital raised.
GP-led deals have become an important source of deal flow
The secondary market for GP-led transactions has grown by about 66% over the past three years and now accounts for almost one-third of secondary volume. Approximately 81% of buyers polled in 2018 had completed a GP-led transaction compared to 59% in 2016.
Rise of emerging market demand
Secondary activity in lesser developed markets for alternative assets totaled $11.0 billion in 2018, which is five times what it was in 2016. Over the past three years, the market has grown both in terms of the number of deals and size of the transactions executed.
The use of leverage continues to proliferate
The use of special purpose vehicles (“SPVs”) used to acquire secondary portfolios has increased to 40% of the amount of all secondary financed deals in 2018, up from 20% last year.