Large Firms Drove Secondary Fundraising to a Record $76 Billion in 2020

Investors pumped a record volume of money into funds that buy secondhand stakes in private-equity assets last year even as the coronavirus pandemic slowed the pace of such deals.

Global private-equity secondary buyers closed on a record $76.13 billion across 29 funds during the period, more than three times the $23.07 billion raised for such funds in 2019, according to preliminary estimates from data provider Preqin Ltd. Last year’s tally exceeded the $42.18 billion record set in 2017, Preqin data show.

All secondary markets are a natural consequence of large pools of capital. Investors’ situations and strategies change over time, creating a need for early liquidity. Commercial loans, mortgages and various types of insurance are some of the many areas in which active secondary markets have developed.

Indeed, except in the relatively small part of their turnover represented by the issuance of new stocks and shares (IPOs and rights issues), all the world’s stock exchanges are secondary markets.

Recently Cebile Capital released its 2020 Year-End Secondaries Market Update, which summarises key trends witnessed in 2020 and outlook for 2021 from secondaries investors. Cebile surveyed over 95% of the active secondaries investors globally to gain insight into their investing activity in 2020 and outlook for 2021.

Most of the remaining 2020 dry powder is concentrated amongst the largest players. While investors with $1 billion or more of available capital represent just 11% of buyers by total number of investors, they account for 61% of the capital pool.

Over a third of outstanding 2020 capital is held by investors with less than $1 billion of available capital. Sufficienttransaction supply – and in particular, a supply of large deals – before year- end is unlikely to occur to allow investors to meet their deployment targets.

2021 and Beyond: Risks and Opportunities for the Secondary Market

For private equity investors in general and secondaries investors in particular, 2020 was in many ways a year of disruption – and opportunities. And 2021 has many chances to come out on top. With the secondaries market becoming even more complicated to navigate, how should it be approached?

In this webinar we will dive into how have investors adjusted their allocation to private equity and secondaries in light of the recent economic disruptions. The insightful and respected panelists will share their views on the evolution of the risk-return profiles of secondaries funds given the expansion of the market. This comes along with a look at supply vs. demand in dealflow and impact on the pricing of secondary deals, and finally, opportunities in the secondaries market post-2020.

Reserve your free seat for this live webinar here

This webinar is provided by Private Equity Insights in coorporation with Northleaf Capital Partners. 

Read More: WSJ