Preqin: Private Capital Secondaries Funds On Track For Record Year

Oct 10 2017 | 8:12pm ET

Momentum in private capital secondaries activity continued in the third quarter, according to new research from Preqin, as six funds raised $5.4 billion to put 2017 well ahead of last year’s pace and on track to break 2016’s record fundraising total.

The third-quarter tally is an increase from the $3.9 billion raised in Q2, Preqin said, and brings the total so far this year to $29 billion across 25 vehicles – matching the previous full-year fundraising record for secondaries funds set in 2014 with a quarter of the year remaining. The number of funds holding final closes in the quarter dipped, from nine to six. 

At the start of the fourth quarter, Preqin counts 44 funds in market looking to raise a total of $31 billion. 37 of the 44 are private equity secondaries funds, five are aimed at real estate secondaries and two are infrastructure secondaries vehicles. 

Other highlights from Preqin’s report:

  • Eighty-eight percent of secondaries vehicles closed in 2017 so far have met or exceeded their target size. 

  • The largest secondaries vehicleto close in Q3 was the $2.7 billion Lexington Middle Market Investors IV fund. 

  • The largest fund in market is Goldman Sachs AIMS Private Equity’s Vintage Fund VII with a target size of $5 billion. 

  • As at the end of September 2017, total private capital secondaries dry powder is at a record $94 billion. 

  • Less than 2% of secondaries funds currently have negative net IRRs, and the median net IRR across all
vintage years is 1.47, surpassing the 1.37 median net IRR for all private capital funds. 

“The first three quarters of 2017 have already seen capital totals exceed those in any other prior full year, and with a quarter of the year to go it seems set to extend this record,” said Patrick Adefuye, Head of Secondaries Products for Preqin, in a statement. “Beyond the fundraising market, private capital secondaries have continued to see strong performance. Only a small proportion of secondaries funds are delivering a negative net IRR and median net IRRs are higher than for all other private capital fund types.

“Continued strong performance by secondaries funds could further attract investors to the asset class, and the industry might see increased fundraising levels in coming quarters,” he added. 

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. The company's Hedge Fund Online service is a leading source of intelligence on the hedge fund industry, with performance information for over 16,000 hedge funds across strategies and geographies. More than 47,000 professionals in 90 nations use the company’s products.

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