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1H 2016 PE SECONDARY MARKET UPDATE

Harken’s 1H 2016 Secondaries Market Update.

1H 2016 Bid Spreads by Fund Type

The summary of secondary bids received by Harken shows continued depressed pricing for energy and tail-end venture, while pricing for buyout has remained competitive through 1H ‘16. Energy fund pricing is set to rebound in 2H ‘16, though it remained low in 1H ‘16. Large buyout funds remain 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, lowering overall pricing for the market. Throughout 1H ‘16, many sellers approached the market coupling attractive funds with less attractive or mature funds while still seeking to acheive competitive pricing.

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Source: Harken Capital proprietary bid analysis. Summary of average high and low bids received by Harken per fund type during 1H 2016. Other includes Natural Resources, Co-Investment, Distressed, and Fund of Funds.

Historical Bid Spreads

Since ‘08 financial crisis, overall secondary market pricing for funds continues to be competitive as the market has matured. Over 35% of all traditional LPs are active participants, sometimes 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.

picture2Note: 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

During 2Q 2016, Ardian Secondary Fund VII set a record for the largest secondary fund raised ever, signaling continued confidence among LPs in the secondary market. Capital overhang continues to increase and is estimated at $75b and could grow to $100bn over the next few years. Secondary funds are currently seeking another $22bn,
resulting in further buying pressure. GP led transactions are increasingly becoming a focus for industry players. Most market participants expect these types of transactions to over perform relative to typical transaction types.

picture3Note: 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, estimated YE 2016 results

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