Preqin: Strong Private Equity Secondaries Fundraising Augurs Well For 2017

Feb 9 2017 | 4:55pm ET

The private equity secondaries sector has enjoyed robust fundraising in recent years, and 2016 marked the second-highest level of capital ever raised, new research from data provider Preqin reveals. 

Preqin’s year-end secondaries update finds that 2016 fundraising was driven by the largest ever secondaries vehicle, the $11 billion Ardian Secondary Fund VII. In the same vein, 2017 has already seen several large secondaries funds reach a final close, including the $7.5 billion Strategic Partners Fund VII, which is the fourth-largest secondaries vehicle of all time. With more multi-billion dollar funds still seeking capital from investors, Preqin’s research suggests 2017 may become another record-breaking year for the private equity secondaries market. 

Key highlights from Preqin’s private equity secondaries update: 

  • 2016 saw 19 funds secure a combined $23 billion of investor capital. This is second only to 2014, when 27 secondaries funds raised $26 billion. 
  • As of the start of February 2017, two secondaries funds have raised a total of $10 billion, including $7.5 billion secured by Strategic Partners Fund VII. 
  • Fundraising prospects for 2017 are good: there are currently 41 secondaries funds in market, targeting an aggregate $29 billion of investor capital. 
  • Of these, 13 have already held an interim close, securing a combined $10.2 billion in investor commitments. 
  • The largest fund currently on the road is Goldman Sachs’ Vintage Fund VII, targeting $5 billion, closely followed by Landmark Equity Partners XVI, which is seeking $4.7 billion. 
  • The secondaries market has seen an intense concentration of capital among leading fund managers; the five largest funds closed in 2016 secured 91% of the aggregate capital. 
  • Secondaries funds remain focused on more mature investment markets: North America-focused funds represented 58% of all closures in 2016. Europe-focused funds accounted for 37% of funds closed through the year, and just one fund closed targeting investment outside these regions. 

“The successful closure of several mega private equity secondaries vehicles through 2016 is indicative of the current investor confidence in the strategy,” said Patrick Adefuye, Preqin’s head of secondaries products, in a statement. “Secondary investments have maintained their appeal to investors, which cite their attractive risk profiles, diversification benefits and mitigation of the J-curve effect as key draws. 

“As a result, [this] market has seen sustained demand, and increasingly some investors are committing to secondaries from a discrete allocation,” he added. “The key concern for secondaries fund managers in the coming months will be that the rapid closure of such large funds has seen a large influx of capital into the dealmaking market, which must be deployed quickly into attractive opportunities.”

Founded in 2003, Preqin is a leading source of information for the alternative assets industry, providing data and analysis via online databases, publications and bespoke data requests. More than 40,000 professionals in 90 nations use the company’s products.

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