It’s Becoming a Seller's Market for Secondary Private-Equity Interests

The popularity of private equity as a way to diversify portfolios has many investors searching the secondary market for interests in buyout funds raised by firms such as KKR & Co. and Blackstone Group.

These buyers will have to pay up due to the heightened interest in the secondary market as way of gaining exposure to private-equity. “Pricing is particularly good at the moment,” said Patrick Adefuye, Preqin’s head of secondaries, in a phone interview. He said the gap between the net asset value of the stakes and the discount is at its narrowest historically.

That means it’s a good time to be a seller on the secondary market, where there’s an abundance of buyer interest. Private-capital secondaries funds raiseda record$13.6 billion during the first quarter, while private-equity firms are also on a tear raising capital, according to financial data provider Preqin.

“Buyers used to get bigger discounts to NAV several years ago; the pricing has gotten closer to par as more money has poured into the market,” said Mike Earley, private equity partner at Jones Day.

Andres Hefti, partner at Multiplicity Partners, adviser to secondary buyers, says that while it’s true that for assets like those owned by large private equity firms - think KKR and Blackstone - buyers are paying par value, those looking for deals tied to middle-market private-equity firms are still able to find assets at a discount.

据投资银行公司Greenhill＆Copill＆Co。，二级市场看到替代资产优惠的价格在去年平均89％的净资产价值占净资产价值，从2015年的90％略有下降。买断基金再次比任何其他策略价格上涨更高，格林希尔以95％的纳米人说2月的声明, adding that it was a 100 basis point increase over the prior year.

Alternative-asset prices in the secondary market have rebounded from the 2008 financial crisis, when private-equity interests traded around 63 percent of their value, according to Adefuye, citing Greenhill data.

“There’s a lot of dry powder,” Adefuye said. “Secondaries have raised to big funds - there’s a lot of money to put into the market. In the next two years there will be increasingly more activity in the market.”

Asset managers are attracted to secondary deals partly because they have a clearer picture of what they’re buying compared to when they contribute capital to private-equity funds that have yet to make investments.

“Secondaries on the surface are lower risk,”Mathieu Drean, managing partner at Triago, said by phone. “They have assets you can evaluate.”

投资者like that they can see how deals are performing under the ownership of a private-equity firm and that they only have to hold the investment for three or four years, which gives them greater liquidity, according to Drean.

There’s another aspect driving interest in the secondary market. Some private-equity funds have held certain assets for 10 to 12 years and are opting to invest more in their deals, to continue building their value, rather than sell them at a lower than expected return, according to Adefuye. Instead of staying along for the ride, he said, some private-equity fund investors become impatient to get their money back and choose to sell their private-equity interests in the secondary markets.

From the start of 2016 through March, nearly half a trillion dollars have been raised for private-equity investment, driving dry powder to a record $842 billion, according to a Preqinreport. In the first three months of 2017, buyout funds raised $54.4 billion, up from $50.1 billion during the same period last year.

“私募股权市场整体上近年来饶有兴趣，”埃利说。“买断市场变得更加高效。与讽刺一样，同样的事情 - 随着越来越多的人意识到那里有很多钱，那么市场变得更加高效。“