Record Secondaries Fundraising to Continue

Secondaries fundraising is expected to hit new heights in the months ahead as investors anticipate a booming deal environment created by the health crisis.

Global secondaries fundraising soared in the first half, PEI data show, with a dozen vehicles securing $35 billion. The amount exceeds full-year totals over 2018-19 as well as before 2017, the year fundraising peaked at nearly $44 billion.

Record-smashing activity was also on display in the North American market. Seven secondaries fund closings took roughly $18 billion at the end of June, a higher level than was reached in the whole of all previous years, excepting last year and 2017. A key to the big dollar hauls were giant offerings. Lexington Partners’ ninth flagship was one of two global pools to amass a record $14 billion. Emerging managers also fared well, seen in the $550 million collected by Banner Ridge Partners, a spin-out of Siguler Guff. Not surprisingly, first-half fundraising results contributed to unprecedented fund sizes and reserves of dry powder.

While secondaries fundraising surged in early 2020, investing paused due to covid-19. This is likely to change, however, as the pandemic’s fallout is generating fresh demand for liquidity solutions, including among general partners seeking to extend investment runways and support portfolios.

LP expectations that deal-making may rival that of the prior down-cycle is adding fuel to fundraising, Nigel Dawn, global head of Evercore’s private capital advisory, tells Buyouts. “The flow of LP capital into secondaries funds accelerated with covid-19,” Dawn says. “I see things continuing, with investors hoping the very good returns of the post-financial crisis period will be replicated.”

A time to thrive…

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