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Europe-Based LP Appetite for Private Equity Secondary Market Purchases - November 2013

by Francesca Braganza

  • 21 Nov 2013
  • PE

Purchasing private equity fund stakes on the secondary market has long been an attractive option for investors in the asset class for a number of reasons. For example, LPs are able to purchase fund interests in vehicles which may have been inaccessible to them during the fund’s fundraising period, and may be able to do so at a discounted price. Another reason that investors look to the secondary market are in order to mitigate the effects of the J-curve, and to also reduce the overall risk of their investment portfolios.

Of the 615 LPs tracked by Preqin’s Secondary Market Monitor that are actively monitoring the secondary market for opportunities to purchase private equity fund interests, 251 (41%) are headquartered in Europe. This group is made up of a range of investor types, such as private equity fund of funds managers, insurance companies, banks and asset managers, and are based in a number of countries, including in the UK, Switzerland and France. These European investors look to purchase fund interests in a range of private equity vehicles, with nearly half (49%) holding a preference for gaining exposure to buyout vehicles through the secondary market. Twenty-eight percent seek fund interests in venture capital vehicles, and 25% have an interest in buying stakes in real estate funds. Growth (20%), mezzanine (9%), and special situation vehicles (7%) are also among the list of private equity funds in which these investors actively look to purchase stakes in.

In terms of geographies, 71% of the Europe-based investors have shown a preference for buying interests in vehicles that focus on opportunities within Europe. Forty-two percent are interested in gaining exposure to opportunities in the US through secondary market investments, and 38% seek exposure to Asia and rest of world regions.

As well as preferences with regards to fund types and geographies, a number of the European LPs look to purchase fund interests in private equity vehicles with particular vintage years. The most highly-sought after vintage years by these investors include 2003 and 2004 (68%), and 2001, 2002 and 2005 (63%).

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