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There is a lot to like about the private equity secondaries market. The abundant growth in the primary private equity market, limited partners (LPs) who are seeking liquidity, or a need for cash, and the discount that buyout secondaries are trading at. All in, we believe this amounts to a solid setup for the strategy.

The private equity secondaries market has shown remarkable strength amid the fundraising challenges in the broader private markets in recent years. In 2023, it was the only strategy to register a positive year-over-year change in fundraising, increasing by 60% from 2022, while other private market strategies saw a 24% decline (see Exhibit 1).1 And in the first quarter of this year (2024), secondaries had its highest fundraising quarter going back all the way to 2008.2

Exhibit 1: Secondaries was the only strategy seeing a positive YoY change in 2023

However, despite this robust fundraising, the secondaries market remains severely undercapitalized, with capital being deployed faster than it is raised. Annual deal volumes, or transactions, have consistently outpaced annual fundraising levels every year since 2010, with the exception of 2020.3 And from 2021 to 2023, secondary funds raised roughly $185 billion but deployed around $350 billion.4 This means that only 53 cents was raised for every dollar invested (see Exhibit 2).5

Exhibit 2: Secondaries deal volumes have significantly outpaced fundraising

So, what does this imbalance mean? Well, the dry powder in the secondary market, which is currently at $235 billion, is expected to shrink over the near to medium term.6 At the end of 2023, the capital surplus multiple, which is the amount of dry powder divided by annual deal volume, implied that there is roughly two years’ worth of dry powder available to fund secondaries transactions.7 And this aligns with broader expectations of industry experts who expect the availability of capital to range from 20 to 30 months.

And the demand for more secondaries transactions may still grow. For example, buyout GPs hold roughly 28,000 unsold companies worth over $3 trillion in unrealized value and are expected to leverage the secondaries market to sell a portion of those positions.8 This is likely to further tip the supply-demand imbalance in PE secondaries dry powder over the near to medium term.

Importantly, the lack of available capital is not due to a lack of investor interest. In fact, investor allocations to secondaries have actually increased approximately two to four times over the past decade.9 And according to Hamilton Lane’s Ryan Cooney – who we previously had on our Beyond 60/40 Episode 3 (see here) – investors are funding those increases by reducing their allocation to primary private equity as well as public equities.

Similarly, according to a recent UBS Global Family Office Report, nearly half (45%) of family offices plan to over-allocate their portfolios to secondaries; that’s more than any other private equity strategy or sector (see Exhibit 3).10

Exhibit 3: Nearly half of family offices plan to over-allocate to secondaries, more than any other strategy

Performance has been one of the reasons driving fresh capital to this undercapitalized strategy. Secondaries delivered stellar returns with a three-year horizon IRR of +20.6%, beating all other strategies, even private equity’s three-year horizon IRR of +19.0% (see Exhibit 4).11 And over the prior ten-year period, secondaries have also produced strong returns with a ten-year horizon IRR of +13.4%. Secondaries are also the only alternative asset class where even the lowest-performing quartile of funds still manage to generate positive returns.12

Exhibit 4: Secondaries stellar returns have beat all other strategies over a three-year horizon

But beyond just performance, we also see further reasons to be positive on the secondaries markets, including faster capital deployment, more mature assets, and shorter J-curves. For more insights on this, please see iCapital’s “How to Navigate a Growing Secondaries Market.”

So, where does this leave us? Well, we agree with the investor sentiment that there is a lot to like about the PE secondaries market. Specifically, first off, PE buyout secondaries are still trading at a discount to NAV, after rebounding in 2022 (see Exhibit 5).13 This discount is 9% as of 2023 versus 13% in 2022, but that is still higher than the average 5% discount seen between 2017 and 2021.14

Exhibit 5: Secondaries discounts have narrowed but remain larger than the 2017-2021 discount

And secondly, the improving global macro backdrop with disinflationary trends and stable GDP growth should support the private equity exit environment, meaning seasoned deals within these secondaries’ vintages may be closer to monetization than they’ve been before. That is likely a solid setup for this strategy.

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1. PitchBook, 2023 Annual Global Private Market Fundraising Report, iCapital Investment Strategy, as of June 27, 2024. Note: Data is based on global fundraising activity through 2023.
2. Ibid.
3. Jefferies Global Secondary Market Review, January 2024. PitchBook, 2023 Annual Global Private Market Fundraising Report, as of June 27, 20224. Note: Annual fundraising levels are based on PitchBook data and annual deal volumes are based on Jefferies data.
4. Ibid.
5. Ibid.
6. PitchBook, iCapital Investment Strategy, as of June 27, 2024.
7. PitchBook, Jefferies Global Secondary Market Review, iCapital Investment Strategy, as of June 27, 2024.
8. Bain & Co., Global Private Equity Report 2024, as of March 11, 2024.
9. Hamilton Lane, Private Equity International (PEI) “Behind the growing pool of secondaries capital”, iCapital Investment Strategy, as of May 1, 2024
10. UBS, Global Family Office Report 2023, May 22, 2024.
11. PitchBook, Q3 2023 Global Fund Performance Report, as of May 6, 2024. Note: Horizon IRRs are three-years through Sept. 30, 2023.
12. PitchBook, iCapital Investment Strategy, as of June 27, 2024.
13. Jefferies Global Secondary Market Review, iCapital Investment Strategy, as of June 27, 2024.
14. Ibid.


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Anastasia Amoroso

Anastasia Amoroso

Anastasia Amoroso is a Managing Director and the Chief Investment Strategist at iCapital. In this role, she is responsible for providing insight on private and public market investing opportunities for advisors and their high-net-worth clients. Previously, Anastasia was an Executive Director and the Head of Cross-Asset Thematic Strategy for J.P. Morgan Private Bank, where she identified and invested in emerging technologies and disruptive trends such as artificial intelligence, decarbonization, and gene therapy. She also developed global tactical ideas and implemented institutional-level implementation across asset classes for clients. Anastasia regularly appears on CNBC and Bloomberg TV and is often quoted in the financial press. See Full Bio.

Peter Repetto

Peter Repetto

Peter is a Vice President and Investment Strategist at iCapital, focusing on developing and delivering research, investment ideas, and thought leadership content for external and internal audiences on behalf of iCapital’s Investment Strategy team led by Anastasia Amoroso, Chief Investment Strategist. Prior to joining the firm, Peter spent over eight years at Franklin Templeton Investments, where he contributed to their asset allocation strategy and macroeconomic research. Peter holds a BA in Economics from Fairfield University.

Nicholas Weaver

Nicholas Weaver

Nicholas is an Associate and Investment Strategist at iCapital, responsible for providing insights into investment opportunities across public and private markets. He works alongside Anastasia Amoroso, Chief Investment Strategist at iCapital. Prior to joining iCapital in 2021, Nicholas spent time as an analyst at a buy-side investment firm, where he contributed to equity and private market research. Nicholas holds a Bachelor of Science degree with a double major in Finance and Business Analytics & Information Technology (BAIT) from Rutgers University.