Secondaries poised for another record year

The secondary market is on pace to hit another record this year.

Secondary market volume of completed transactions hit an estimated $46 billion in the first half of this year, up about 25 percent from nearly $37 billion in the same period a year earlier, according to a survey from Setter Capital. If the pace keeps up, market volume will top the $79.7 billion recorded for all of 2018.

The PE secondary market, which makes up the largest share of the overall market, rose 33.5 percent to $42.10 billion, Setter said.

Secondary transactions were down for both real estate and hedge funds. Real estate secondaries, including funds and directs, dropped nearly 39.2 percent to $1.91 billion. Hedge fund secondaries fell 35.1 percent to $340 million, according to Setter .

The survey, conducted in June, represented responses from 97 of the 120 most active and regular buyers in the secondary market. This includes 64 secondary funds and 41 funds-of-funds. Setter, of Toronto, is an investment bank focused on the secondary market.

Buyers completed 895 transactions during the first half, up 20 percent from 2018, across the entire secondary market. The average deal size was about $51.40 million, Setter said.

Secondary funds were the most active buyers during the first half, accounting for 87.4 percent, or $40.23 billion, of total purchases. Funds-of-funds accounted for 10.1 percent, or $4.66 billion, the survey said.

Large buyers dominated the secondary market. According to Setter, 13 large acquirers — those that deployed $600 million or more during the first half — purchased $31.55 billion in assets. This represented about nearly 69 percent of total volume across 155 transactions, Setter said.

When it came to sellers, GPs and bankers were the most active, the survey said. GPs made up 27.8 percent of first half volume, while banks were responsible for 19.5 percent, the survey said.

Among sellers, pensions are expected to be the most active sellers again in the second half, Setter said.

Action Item: Download Setter’s report: