Private Equity Secondaries Fundraising

Largest ever fund closure in 2016 is followed by multi-billion dollar vehicles at start of 2017

Largest ever fund closure in 2016 is followed by multi-billion dollar vehicles at start of 2017

2016 Hedge Fund Letters

The private equity secondaries market has enjoyed robust fundraising in recent years, and 2016 marked the second-highest level of capital ever raised. Preqin’s year-end secondaries update finds that 2016 fundraising was driven by the largest ever secondaries vehicle, the $11bn Ardian Secondary Fund VII. In the same vein, 2017 has already seen several large secondaries funds reach a final close, including the $7.5bn Strategic Partners Fund VII, which became the fourth-largest secondaries vehicle of all time. With more multi-billion dollar funds still seeking capital from investors, 2017 may be another record-breaking year for the private equity secondaries market.

Private Equity Secondaries Fundraising

By Katrina.Tuliao (https://www.tradergroup.org) [CC BY 2.0], via Wikimedia Commons

The 2017 Preqin Global Private Equity & Venture Capital contains further analysis on the secondaries market and the private equity industry: please contact press@preqin.com for a complimentary press copy.

Key Private Equity Secondaries Fundraising Facts:

  • 2016 saw 19 funds secure a combined $23bn of investor capital. This is second only to 2014, when 27 secondaries funds raised $26bn.
  • As of the start of February 2017, two secondaries funds have raised a total of $10bn, including $7.5bn secured by Strategic Partners Fund VII.
  • Fundraising prospects for 2017 are good: there are currently 41 secondaries funds in market, targeting $29bn of investor capital.
  • Of these, 13 have already held an interim close, securing a combined $10.2bn in investor commitments.
  • The largest fund on the road is Goldman Sachs’ Vintage Fund VII, targeting $5bn, closely followed by Landmark Equity Partners XVI, which is seeking $4.7bn.
  • However, 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.

Patrick Adefuye, Head of Secondaries Products:

“The successful closure of several mega private equity secondaries vehicles through 2016 is indicative of the current investor confidence in the strategy. 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, the market has seen sustained demand, and increasingly some investors are committing to secondaries from a discrete allocation.

Following the successes of 2016, it is encouraging to see that 2017 has begun with such strong fundraising momentum. Furthermore, the fundraising pipeline for the year ahead is promising, with several funds targeting sizeable investor commitments, while the supply and demand indicators all point towards a buoyant secondaries industry in the coming years. 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.”

Article by Preqin

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