The private equity secondary market is of growing importance to investors in the asset class for a range of reasons, such as active portfolio management, mitigation of the J-curve and consolidation of the number of GPs with which an LP has a relationship.
Preqin’s Secondary Market Monitor online service currently tracks 660 investors that have demonstrated an interest in acquiring private equity fund stakes on the secondary market, whether as a crucial part of the LP’s strategy or a purely opportunistic segment of its investments. Private equity fund of funds managers make up the largest proportion (27%) of these buyers, while public pension funds represent 13% and private sector pension funds 8%. Geographically, 47% of potential buyers on the secondary market are headquartered in North America, 35% are based in Europe and the remaining 18% have head offices in Asia and other geographic areas, such as the BRIC region.
On the seller side, however, Europe-based firms make up the majority of LPs, representing 43% of 418 total potential sellers of private equity fund interests tracked by Preqin. Forty percent are based in North America and 17% in Asia and other regions. Private equity fund of funds managers again make up the largest segment of these LPs (14%), with private sector pension funds, public pension funds and insurance companies each composing 10%.
So far in 2015, four secondaries vehicles have completed fundraising, securing an aggregate $11bn in investor capital to be deployed in the secondary market. This, added to the total capital secondaries funds raised over 2014, means that nearly $40bn has been raised for secondary opportunities over the past 20 months. Managers of secondaries funds have raised over $156bn in the past 10 years. The table below shows the top 10 largest fund managers by total capital raised by secondaries funds over this period.