Market volume

Morning!

I got some push back yesterday on my contention that activity in the secondary market has come to a halt as the year comes to its end. A few folks argued they are still scrambling to finish off processes in the waning weeks of December. Which, if true, I’d love to hear more about your activity. A lot of folks are standing pat and preparing deals for January, from what sources have told me.

It will be interesting to see where secondary activity ends up this year. At the half-year point of 2019, estimates put total deal activity somewhere around $42 billion, with the expectation that total activity this year will hit $90 billion or more, with some high estimates over $100 billion.

But since that half-year mark, activity has slowed, so we’ll have to see how things shake out for the full year.

Meanwhile, here’s Charles Smith, managing partner and CIO of Glendower Capital on market activity, who has an interview on Secondaries Investor. Read the full Q&A here.

“I think we’ll see the market reach $100 billion, or very close to, of annual deal value this year — it was around $75 billion in 2018. More broadly, however, the secondaries market will continue to be the liquidity solution to the private equity world. As private companies increasingly seek to stay private, I can see a point where GPs will own assets for 20 years or even 30 years, backed by different groups of investors, as liquidity will be offered through the secondaries market at varying points along the way.”

Smith also says GPs may start building liquidity options into the funds so that, at a certain period of time like year 10, LPs can choose to sell their stakes in the pool. “Ultimately, that could well mean that they use the secondaries market as a fourth exit route alongside the traditional IPO, trade sales and secondary buy-out. As a result, four-track processes may not be that far away.”

LP: DuPont Capital is ramping up its private equity activity now that it’s operating with a nearly full staff, Chris Pettia, portfolio manager in the private markets group told me recently. The group, which invests the DuPont Pension Trust as well as third-party institutional capital, has been on a steady pace through 2017 and 2018 and doubled activity this year. Check out my story here.

The big challenge for LPs is differentiating managers at a time when most managers show fairly strong returns, Pettia said. The market hasn’t turned down enough to really shake out the weak players, so it can be a challenge to assess which managers will be able to weather an economic storm.

Top Scoops

Consonance Capital Partners sold its investment in Enclara Healthcare through a deal value upward of $700 mln, writes Sarah Pringle over at PE Hub. The buyer is healthcare insurer Humana, which will extend its pharmacy solutions business to include needs associated with hospice care. Check it out here.

Novacap launched its debut financial services fund with a C$500 million target and hard cap of C$600 million. The fund raised an initial C$260 million, writes Kirk Falconer. Read it here.

That’s it! Have a great rest of your day. Hit me up as always with tips n’ gossip, feedback or just to chat at cwitkowsky@buyoutsinsider.com, on Twitter or find me on LinkedIn.