Growth & sophistication: Unpacking the latest findings in the secondaries market
Our latest Secondaries report found that the secondaries market remains a significant growth area within private markets, having demonstrated remarkable resilience in volatile economic conditions. Investec's Sharon Thandi unpacks the findings in more detail.
Market dislocations create opportunity for secondaries investors, as Private Equity (PE) firms and limited partners seek liquidity by selling or reshuffling their portfolios. Amid tougher fundraising conditions, the secondaries market saw around $118bn1 of capital raised last year, and secondaries financing has evolved in tandem.
As higher interest rates have impacted short-term appetite, capital-call facilities have proven to be used universally for their beneficial effect on operational efficiency. These facilities saw a higher utilisation driven from higher volume of secondaries deals.
Portfolio and net-asset-value financing on secondary funds and LP-led portfolios is still widely used, with some opting to introduce facilities earlier in the lifespan of their funds. We have seen both banks and non-bank lenders increasing their appetite here, drawn by the asset class’s strong risk/return profile and the diversified nature of the portfolios, with some of these facilities receiving credit ratings.
At Investec, our outlook on the long-term prospects for secondaries financing is positive. General and limited partners are increasingly looking to bespoke and tailored financing structures to suit their portfolios and meet their needs. This trend is especially notable in continuation vehicle financing, with managers using the tool on a case-by-case basis for various purposes. Customising the facilities for each individual transaction can be an excellent way to ensure that capital structures are optimised. These facilities are designed to benefit all participants in a secondaries deal, drawing on the importance of alignment in these deals.
1Secondaries Investor Fundraising Report FY 2023
Speak to an expert
Sharon Thandi
Fund Solutions
I focus on origination within the Fund Solutions business and the Private Equity Secondaries strategy, supporting clients with their financing needs across various products such as capital call facilities, GP facilities, NAV-based lending and bespoke debt financing structures.
