Evening Brief – 04.04.23
In recent years, the appetite for the private secondaries market has increased amid a growing list of high-growth private companies. The first half of 2022 saw a record $57bn in secondaries transactions. While uncertainty around valuations caused the market to recede in the second half of 2022, mounting pressure on investors could trigger a wave of deals in 2023.
A PE secondary fund purchases existing interest from primary investors. A primary investor or fund may invest in a private company, purchasing a stake in that company, and then sell that interest to a secondary investor at some point in the future.
Through this process, primary investors gain liquidity, while secondary investors can diversify their portfolios, benefit from shorter durations and faster returns, and invest in an asset that is less correlated with public markets.
It’s possible the ingredients are in place for the PE secondaries market to see sizable interest in 2023 given a stockpile of dry powder, a sustained pause in public market exits and investors eager to trade private equity for liquidity.
Adding to the bullish scenario may be the recent proactive government action guaranteeing deposits of failed tech and crypto-friendly banks, further clarity on the path of future monetary policy and cash at its highest levels since COVID.
Blackstone announced a record raise of over $25bn for the world’s largest-ever dedicated private equity secondary fund in January, which crushed the $19bn record set by Ardian in 2020. Will other investors join the possible start of the trend?