Secondaries prices remain strong in Europe amid global dip – research

Denise Ko Genovese
24 January 2020

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Setter Capital's latest research shows that pricing for secondaries in Europe remains bullish, despite a drop in prices paid for secondaries deals across most strategies worldwide.

The price of global secondaries transactions dropped in the last quarter of 2019, according to Setter Capital's latest pricing report. Across all funds, prices were down an average of 7.55%, with all strategies dipping apart from distressed credit funds, which were broadly flat.

However, despite a 2.42% dip in pricing, western European funds remained highly sought after with the strongest average valuation, at 101.26% of par. By comparison, the average price for North American assets was 83.27.

In terms of a 12-month price analysis, most strategies worldwide were down apart from growth, distressed credit, mezzanine, cleantech and real estate secondaries, which all saw an increase in prices.

Of the 824 LBO funds Setter analysed worldwide (over the entirety of 2019), prices were 2.22% down to 93.55% of par by the end of the year (average top price in the 90 days prior to 31 December 2019). A total of 351 funds-of-funds showed an average price drop of 3.96% to 81.93, while infrastructure was down 3.39% to 91.39 and venture capital secondaries dropped 1.47% in price to 74.76. Real estate prices crept up, rising 0.17% to 84.08, as did distressed credit, which was up 1.83% at 87.74. The biggest price increase came from growth fund secondaries, which were up 5% at 90.59.

In terms of geography, LBO secondaries prices were once again highest in western Europe at an average of 110.41, followed by North America at 97.86 and Asia at 85.88 (in the 180 days preceding 31 December 2019).

Other factors that influence prices on the secondary market include vintage, with the highest prices paid for LBO funds for 2018-2020 vintages (107.5% of par), compared with 2010 and older vintages at 86.28; fund size and liquidity rating, with the highest prices paid for funds in the €500m-1bn bracket; and the percentage at which the vehicle is already funded. In terms of LBO funds, the highest price being paid was for those 0-25% funded at a 105.54 settled price, compared to those that were 75-100% funded, going for an average price of 94.27.