Secondaries market hits record $143bn in spectacular rebound from Covid-19 woes


The global private equity secondaries market hit a bumper $143bn in the 2021 financial year to seal a stunning recovery from the Covid-19 pandemic, new research shows.

The 132% year-on-year increase from 2020’s $61.8bn marked the first time the secondaries market had surpassed $100bn, according to data from Setter Capital.

It said that with one exception volume was up significantly across all alternative investments in the secondary market.

Private equity secondaries (funds and directs) increased 137% year over year to a total of $133bn, while private equity funds alone were up 164% to $65.7bn in FY 2021.

It said salient increases were also seen across LBO fund secondaries (up 158.3% to $49.63bn in FY 2021, VC fund secondaries (up 154% to $9.1bn) fund of fund secondaries (up 249.7% to $4.17bn), and most notably debt fund secondaries (up 300% to $2.55bn).

Hedge fund secondaries, however, were down 23.3% to $330m.

Setter said that while the breadth and number of buyers continued to increase, the most significant activity was driven by the largest buyers in the market.

The twenty-five largest buyers, who deployed more than $1bn each in FY 2021, accounted for 80.9% of the market’s total volume – up from 67% in FY 2020.

Another seventy-two mid-sized buyers accounted for 18%, down on 29.8% from FY 2020. Setter said the top three buyers alone transacted on about $47bn in volume.

The report said buyer competition for deals continued to heat up in FY 2021, as noted
by 22.4% of respondents, versus only 1.2% that felt it was lower.

Setter said that as a means to stay competitive, the use of debt to improve pricing and deal returns continued to be common in the secondary market.

Although most respondents felt the use of leverage hadn’t changed, 13% felt it was higher and only 1.3% felt it was lower.

Setter said that 9% of buyers had a higher proportion of deals fall apart in FY 2021 versus FY 2020 – slightly more than H1 2021, when 7% reported more deals falling through.

Buyers noted that the main reason was that the seller decided not to sell (57%). Adverse
portfolio or manager issues uncovered in post-LOI diligence (13%) and disagreement over PSA terms (11%) were two other notable deal breakers.

Setter said buyers expect FY 2022 volume to be $149bn, up another 4.1% from the impressive 2021 results.

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