Secondaries volumes could soar by 20% this year to a record of around $137bn, new data from Jasmin Capital suggests, underscoring the accelerating rise of the asset class in recent years.
About $110bn of capital was raised for secondaries dealmaking last year according to the firm’s latest Secondaries Index – double the total collected in 2022, leading to about $150bn of dry powder being available at the start of this year.
Jasmin said that small and mid-sized buyout fund stakes remain the most sought out by secondary buyers, with about 80% of ‘likely’ or ‘very ‘likely’ interests thanks to distinctive value creation and liquidity profiles.
Large buyout follows similar trends, the report said, but VC and growth, infrastructure and private debt are generating less interest among global secondaries buyers.
Jasmin collated answers from more than 200 respondents with more than $5tn of aggregate AUM, based across four continents.
It said vintages from 2015 to 2019 are the “sweet spot” for secondary buyers, with 85% of buyers who would ‘likely’ or ‘very likely’ purchase those vintages. given the attractive entry point on the J-curve.
Fund stakes of high performing mid-market GPs are the most sought by secondary buyers, Jasmin said, due to them offering the most competitive pricings – close to par for the most performing and searched funds
Discounts have narrowed over the last months in the VC market, with secondary investors “operating a selective flight to quality”. Jasmin said buyers were largely only looking at high quality portfolios due to intensive deal flow, adding that most of the transactions close at discounts of between 30% and 50%.
Secondary buyers expected returns largely fall between the 1.5x and 1.9x boundaries for a diversified LP-led portfolio.
Secondary buyers expected returns on single asset continuation vehicles were well spread between 1.9x and more than 2.5x, depending on the level of risk and return of the transaction.
Expected returns for multi-asset continuation vehicles were more concentrated around 1.9x and 2.3x, Jasmin said, as these continuation vehicles are more diversified with fewer risks.
Single and multi-asset continuation vehicles remain the most preferred structures for more than 65% of GPs respondents, given they are well established tools to pursue value creation on assets or liquidate a fund.
‘Providing LPs with liquidity options’ remains the main driver of GP-led transactions, quoted by more than 40% of GP respondents.
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