Direct secondaries set to peak in 2017

Alice Murray
30 July 2013

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The volume of the direct secondaries market has already doubled in the last year and is set to continue expanding rapidly, according to recent research by placement agent Triago.

According to Triago's most recent quarterly report, direct secondaries have increased their market share of the secondaries market in volume from 6% in 2012 to 12% this year.

The placement agent predicts this type of transaction will rocket to 25% of transactions in the secondary market by 2016 or 2017. The forecasted surge in direct secondary deals is attributed to increased pressure to restructure poorly performing, cumbersome portfolios from funds carrying vintages between 2005 and 2008, when record amounts were raised during the credit bubble.

As direct secondaries are less popular with LPs compared with vanilla secondaries, there is an expectation that potential sellers and arrangers will have to employ more aggressive techniques and be forced to use deferred payment structures, rollovers and other options that offer more upside.