Emerging Markets-Based Investors’ Appetite for Acquiring Fund Stakes on the Secondary Market

by Thea Diaz

  • 13 Dec 2016
  • PE

Preqin’s Secondary Market Monitor currently tracks 80 emerging markets-based investors that have an interest in purchasing fund stakes via the secondary market, representing 8% of potential buyers of secondary fund interests globally. Indicative of their appetite, the number of emerging markets-based LPs interested in acquiring secondary fund interests has grown by 74% over the past year.

Private equity fund of funds managers make up the largest proportion (18%) of emerging markets-based investors with an interest in buying on the secondary market. Insurance companies (15%), public pension funds (9%), family offices (8%) and private equity firms (8%) also represent significant proportions of potential buyers in the region.

As shown in the chart above, emerging markets-based investors have a preference for acquiring buyout, venture capital and growth fund interests on the secondary market. In terms of geographic preference, 37% target vehicles focused on Europe, 33% have a preference for North America-focused vehicles and, unsurprisingly, 85% seek to acquire fund stakes elsewhere.

The two largest potential secondary buyers in emerging markets, China Investment Corporation and Abu Dhabi Investment Authority, have an aggregate $1.6tn in assets under management (AUM), representing 6% of the aggregate AUM held by all secondary buyers. This demonstrates that there are significant LPs outside the more developed markets of North America and Europe that are active in the space. These large secondary buyers, along with the rest of the evolving secondary market within emerging markets, illustrate the potential for growth in the secondaries market in the region.

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