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2021 Secondary Market Overview

Category: Secondary Market Research Year: 2021
25 March 2021
The COVID-19 global health and economic crisis upended private market activity last year causing some longer-term secondary trends to pause while accelerating others

Our annual report on the global secondaries market provides insight on market dynamics, trends and factors that are shaping the asset class as well as an outlook for 2021. The report is based on proprietary data gathered from a survey sent to more than 100 of the largest and most active secondary participants globally.

2020 represented the first year in which LP-led transactions did not represent a majority share of the market. The significant change in the profile of secondary market transactions highlights the growing importance of GP-led transactions for the secondary market, which has seen its share of the market grow by 10% from 2019. GP-led transactions will continue to grow in popularity, with single-asset deals especially attractive, but the bar will be raised for these types of transactions. 

More LPs than ever before recognize the benefits of using the secondary market to consolidate GP relationships, rebalance their sector or strategy weightings, reduce administrative burden or take profits on fully marked positions. As private market programs continue to expand, portfolio managers will be forced to think in relative value terms as opposed to the traditional hold until exit strategy of the past.

As the market recovers, we expect to see a few key trends that will influence the global secondary market's future direction and growth. These include a rebound in LP-led transaction volumes, growing appetite from institutional LP and greater specialization across secondary buyers.

Gerald Cooper

Partner & Head of US Secondaries

“With a strong second half of the year, secondary transaction volume exceeded dire expectations and fundraising in the secondary market proved to be resilient.”

Key findings for 2020 include:

Market transaction volumes dropped sharply

Despite early predictions of less than $40 billion of total volume for 2020, the second half of the year saw a jump in activity and the year closed with a respectable $60 billion of transaction volume.

LP-led transactions did not represent a majority share of the market

GP-led transactions increased as a share of the market and were favoured on both the demand and supply side.

Asia Pacific markets experienced the sharpest pullback

Deal volumes in Asia Pacific were down by 60%. Key drivers included the lower penetration of GP-led and preferred equity transactions, which facilitated recovery in other markets.

Flight to more recent vintage assets

Buyers focused on more recent vintages of funds where marks were not fully valued and unfunded commitments had the prospect of being deployed in a cheaper investment environment.

Preferred equity deals become mainstream

Preferred equity transactions grew to a record 14% of the market in 2020, with buyers able to rely on higher downside protection to deploy earlier into the pandemic.

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