Secondaries activity rebounds to record USD 55bn in H1 – survey

The private equity secondary market (funds and directs) increased 198% year-on-year, to reach USD 51.92bn. But the strongest increases were seen across the VC and fund-of-funds secondaries, with activity quadrupling (up 322% for VC and 342% for fund-of-funds). Private debt fund secondaries were up by 177.3%, but infrastructure fund secondaries actually took a step back compared with H1 2020 (from USD 1.44bn to USD 910m).

Traditional fund secondaries increased by 75% to USD 22bn in H1 2021, while direct secondaries quadrupled from USD 7.64bn to USD 32.91bn, including USD 31.73bn's worth of PE secondaries directs. As a result, direct secondaries went from 37.8% of total volume in H1 2020 to 59.9% in H1 2021, which is the first time they have made up the majority of total transaction volume, according to Setter.

The average fund purchased in H1 was 5.78 years old, which is older than the average in H1 2020 (5.52 years old).

The largest buyers continued to drive the market in H1, with the 20 largest buyers (those that deployed more than USD 600m in the period) accounting for 69.5% of the market's total volume.

More than a third (37%) of respondents to Setter's survey noted that competition for deals increased in the first half. Processes were smoother, though, with just 7% of buyers stating they had more deals falling apart in H1 2021 versus H2 2020 – back in Q1 2020, 60% of respondents reported more deals falling through. Sellers pulling out was cited by 77% of respondents as the main driver behind deals being abandoned.

GPs themselves accounted for 40.8% of all sellers in H1 2021, confirming the prevalence of GP-led secondaries in the market. Sovereign funds were the next most active sellers (11.6%) followed by pensions (11.3%). However, most buyers polled by Setter expect pensions to turn into the biggest sellers by the time 2021 is out (41.6% of total transaction volume).

Buyers estimated that NAVs will increase by 4.2% across the board, with the pace of distributions also increasing by 3.5% this year. Overall, they expect full-year volume to continue to rebound to USD 110.40bn, which would be up 78.6% from the USD 61.8bn transacted in 2020.

The survey polled 94 respondents, out of the 131 "most active and regular buyers" in the secondary market, according to Setter.

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