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2H 2015 – PRIVATE EQUITY SECONDARY MARKET UPDATE

Boston, MA—Harken Capital is pleased to present its 2H 2015 Private Equity Secondaries Market Update.

2H 2015 Bid Spreads by Fund Type

The summary of secondary bids received by Harken shows continued depressed pricing for energy and venture, while pricing for buyout has remained competitive through year-end. Oil prices fell lockstep with buyer interest throughout 2015. Buyout funds however remained the most competitive with select Sm/Mid buyout funds pricing at par or slight premiums above NAV. The market continued to see tail-end funds and fund of funds which are generally viewed as less attractive to buyers. Throughout 2H, many sellers approached the market coupling attractive funds with less attractive funds while still achieve competitive pricing.

Bid Spread by Fund Type

Source: Harken Capital proprietary bid analysis. Summary of average high and low bids received by Harken per fund type during 2H 2015.  Other includes Natural Resources, Co-Investment, Distressed, and Fund of Funds. 

 

Historical Bid Spreads

Secondary market pricing for funds continues to be competitive as the market has matured. Over 25% of all traditional LPs are active participants, often participating in auctions and competitive situations. The secondary universe continues to expand with over 75% of the LP universe open to explore the market as a buyer or seller.

Historical Bid SpreadsNote: Chart represents median high and low bids received over specified time periods.

Source: UBS, Cogent Partners, and Harken Capital analysis. Represents average high and average low bids per year.

 

Secondary Capital Raised and Transaction Volume

2015 total volume ended slightly lower than 2014, but historically high relative to prior years. There were fewer larger fund portfolio sales but a larger number of transactions spread across types and vintages. Capital overhang continues to increase and is estimated at $80b and could grow to $100bn over the next two years if capital is not deployed. Secondary funds are currently seeking another $25bn, resulting in further buying pressure. Traditional LPs continue to enter the secondary market for “strategic” reasons, enhancing returns and shortening j-curve effect, often outbidding secondary funds for one-off funds.Capital Raised and VolumeNote: The above charts contain information which discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. 

Source: Preqin, Probitas Partners, Harken Capital

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