Private Market Secondaries

Charting the Landscape: FH 2024's Private Market Secondaries and Fundraising

We're excited to bring you some compelling insights and visuals from the latest reports across the Private Markets industry. This week, we've curated a series of graphics that offer a deeper look into emerging trends, recent market activity, and key developments in private market secondaries.

• Private Market Secondaries 1H 2024 Market Outlook by BlackRock

Blackrock’s 1H 2024 Private Market Secondaries outlook had a ton of great insights.? We will summarize a few points here, but check out the link above.

The slowdown in traditional exit activity has led to increased adoption of secondary markets by both LPs (55% of volume) and GPs (45% of volume). Despite secondary volume representing only ~1% of total unrealized value in private capital markets, there is significant potential for growth. However, capital availability remains limited, with a 1.3x ratio of capital to 2023 transaction volume. LP-led transactions dominated 2023, growing by ~15% compared to 2022, while GP-led transactions also saw modest growth.?

Record secondary fundraising volumes reached $117bn in 2023, though there is evidence of return compression among large managers, while mid-sized players continue to find opportunities. The market remains undercapitalized, suggesting significant opportunities for alpha as demand for liquidity drives ongoing expansion and innovation in deal flow. Going forward, buyers and sellers will focus on portfolio quality, programmatic approaches to secondary sales, and differentiation among market participants.

• Global Private Market Fundraising Report by Pitchbook

Pitchbook’s recent Private Market Fundraising Report covered the entire private market landscape, including VC, PE, Real Estate, and Secondaries. Check out the report for full details.

Secondary fundraising had a robust start in Q1 2024, with $35.0 billion raised across just 10 funds. This represents the highest first-quarter fundraising total for the strategy since 2008 and marks a 6.0% year-over-year increase from the $33.0 billion raised in Q1 2023.

• Private Equity Inflection Point by Goldman Sachs

Despite an increasingly active IPO market, the secondaries market has become mainstream, providing a viable exit option in a more muted exit environment for corporates with pragmatic valuation outlooks. The growth of the secondaries market is expected to continue, enabling GPs to enhance distribution to paid-in capital (DPI) performance. According to David Kamo, Global Head of Financial Sponsor M&A at Goldman, the secondary market is growing and serving as a valuable tool for GPs to extend holding periods for key assets, recapitalize older assets and funds, or buy time to exit in favorable conditions.

The data reveals a marked shift toward increased adoption by both LPs and GPs, with record-breaking fundraising volumes and a burgeoning potential for growth despite current capital constraints. The notable rise in secondary fundraising and the evolving dynamics of LP and GP-led transactions underscore the importance of strategic positioning in this thriving sector.

The charts illustrate a landscape with opportunities, particularly as the market adapts to changing conditions and seeks to balance liquidity needs with investment potential. As we progress, the emphasis on portfolio quality, programmatic approaches, and differentiation will be pivotal for navigating this evolving terrain.

In light of the current trends and data, how should investors and managers adapt their strategies to capitalize on the growing opportunities in the private market secondary space?

Recent News

• NEA, a Silicon Valley-based venture capital firm, has recently raised over $468 million for its NEA Secondary Opportunity Fund. The fund closed on July 3 and attracted investments from more than 60 limited partners, including the San Francisco Employees’ Retirement System. This new fundraise marks NEA’s return to the secondaries market, an asset class that involves purchasing existing stakes in companies or other funds.

• HarbourVest raised $15.1 billion for Dover Street XI, making it the third-largest secondaries fund ever. Combined with Secondary Overflow Fund V, they secured $18.5 billion for secondary deals.

• Goldman Sachs Alternatives today announced the final close of its third dedicated real estate secondaries fund, Vintage Real Estate Partners III (“VREP III”), on $3.4 billion.

• Private credit secondaries experienced their largest pricing increase in H1 2024, according to Greenhill, with average bids for secondhand stakes in private debt funds reaching their highest levels since at least 2017.

• Top advisors predict secondary volume for 2024 to average $137.7 billion.

• Secondary buyer Hollyport participated in CloudPay's $120 million round, which was led by Blue Owl and included investments from Rho Capital Partners and The Olayan Group.

• StepStone is on track to double the size of its previous fund with its latest flagship private equity raise. The past year has marked the firm's most successful fundraising period to date, with nearly $28 billion secured.

Reach out regarding any questions or support needs related to private debt and private market secondaries at [email protected].

For more information about Axis Group Ventures, visit our website.

Arjun Gill and Tania Tugonon - thanks for your contributions researching and drafting this post.??

Best regards - Tim

#privatemarket #secondaries #venturecapital #privatecredit #privateequity