Surging Secondaries Volume — Evening Brief – 08.14.24
The secondaries volume activity soared by a record 50% in the first half of 2024 as large investors in the asset class continue to buoy the market, new research showed.
The secondary market transacted more than $67 billion in the first half of the year, a significant increase from the $45 billion transacted in the same period last year, according to the latest Volume Report from Setter Capital.
The Canada-based advisory firm focused solely on the secondary market said volume was significantly up across all secondary market segments except hedge funds and debt funds, with the private equity secondary market across funds and directs rising by an astonishing 53.6% to $63.32 billion.
Private equity fund secondaries increased by 39.4% to $34.36 billion in volume compared to the first half of 2023, LBO fund secondaries increased by 38.7%, and venture fund secondaries increased by 151.3% to $2.66 billion, owing in large part to Lexington’s $1 billion venture portfolio purchased earlier this year.
According to Setter, LP-led fund secondaries climbed 35.2% from the first half of 2023 to almost $38 billion, while direct secondaries increased 75% to just shy of $30 billion.
Pension funds were the most active sellers, accounting for 33.1% of total volume, while fund managers across all strategies, including buyouts, venture capital, and fund of funds, accounted for 29.5%. According to Setter, insurance companies contributed 13.7%, a huge increase from 8.5% last year.
Despite the breadth and number of buyers continuing to rise, the most significant activity was driven by the 20 largest buyers in the market, the report said. “The largest buyers (defined as those that deployed more than $600 million in the first half) accounted for 71.4% of the market’s total volume (versus 62.2% in the first half of 2023), while the 55 mid-sized buyers accounted for 24.7% (versus 31.6% in the first half of 2023) and the 57 smallest buyers represented 3.9% (versus 6.2% in H1 2023). “
Setter noted that the top five buyers alone transacted $36.5 billion in volume (53.9% of the total 2024 volume). “The use of debt to improve pricing and deal returns continued to be common in the secondary market and 84.1% of respondents felt the use of leverage was the same as in 2023.”
Setter added that buyers expect FY 2024 to remain strong, with 2024 volume hitting more than $131 billion, a 19.5% increase from FY 2023 and a new yearly record.