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Last year, investors have repelled a record amount of private equity shares on the second-hand markets, since the persistent dry spell in the business processing was encouraged to search for pension funds and buyout groups to seek their investments make.
The volume traded worldwide reached $ 162 billion on the so-called secondary market, where investors in private equity or other private funds sell their shares against cash to new investors or the fund managers themselves sell company shares to new funds.
According to an analysis by the investment bank Jefferies, the sum was an increase of 45 percent compared to the previous year and more than 20 percent higher than the previous maximum value in 2021.
Secondary businesses have experienced a boom in recent years because private equity companies had difficulty ending investments from stock exchange or sales to sufficient attractive reviews, which led to a lack of cash distributions to the funds of the funds.
Fund investors-“Limited Partners” or LPS-instead turned to the secondary markets to find buyers for their shares, while the private equity companies that manage the funds-“General Partners” or GPS-also searched for alternatives have to redeem your investments.
“The record-breaking secondary volume last year was due to the persistently low (bar) distributions, at a time when many LPs were looking for liquidity,” said Scott Beckelman, global co-manager of secondary advice at Jefferies.
According to Jefferies, both limited partners – often institutions such as pension funds, foundations or government investors – sold record volumes on the secondary market last year.
Limited partners sold fund shares worth $ 87 billion, an increase of 36 percent compared to the previous record from 2021, after a lack of deals in the first year of pandemic triggered a rush to payouts and new weighting too strongly weighted portfolios to private Equity.
Investors in funds usually sell their shares with a tee, but Jefferies said that the gap last year decreased to 6 percentage points below the net inventory value for shares in Buyout funds, compared to a gap of 9 percentage points a year earlier.
Jefferies said that the price increase showed the confidence that private equity managers would soon be able to sell the underlying portfolio companies, as Wall Street is preparing for a return of business conclusions under the second Trump government.
Buyout funds have had to deal with strong antitrust authorities in both Europe and the USA in recent years. However, a change in waking among the most important competitive authorities in the USA, the EU and the United Kingdom could serve as a prelude to a more Laissez-Faire approach in mergers and takeovers and contribute to facilitation.
The prices for shares in private credit funds rose even more than those of buyout vehicles-from 77 percent of the value of assets to 91 percent-after new funds have been put on to buy used shares in private credit funds.
The prices for real estate and venture shares remained somewhat lower with 72 percent or 75 percent of the value of the underlying assets.
“There are so many underlying LPs who say: ‘I have not received any more distributions from my venture portfolio for well over 24 months,” said Todd Miller, who also acts as a global co-manager of secondary advice for Jefferies.
Private corporations also turned to secondary markets, with complementary selling assets worth $ 75 billion in 2024, 44 percent more than in the previous year.
The majority of this-$ 63 billion-came from the managers who sold their assets from one of their funds to a newer fund that is managed by the same company, a so-called continuation vehicle.
Continuing vehicles have become a popular option for private equity companies to return money to investors of a fund without having to find a buyer for the entire portfolio company-especially if such a sale may not achieve a favorable assessment for the manager.
Three of the approximately 30 exit events of the European private equity company EQT last year included the transmission of shares between EQT funds, said a person of the Financial Times familiar with the matter, although external investors were also consulted in all three.
