Secondary Fundraising Stays Strong Despite Pandemic

Fundraising has remained strong as buyers raise ever larger capital pools.

The coronavirus pandemic stalled deal activity in the secondary market in the first half of the year, but secondary funds continue to find favor as investors bet that deals will pick up as the pandemic eases.

“Coronavirus is creating a hundred-year-flood scenario for the marketplace where secondary buyers can be the beneficiaries,” said David Fann, vice chairman of investment advisory and research firm Aksia LLC. “If you were a secondary fund that just raised capital, this could be the best buying opportunity since the Great Financial Crisis.”

Secondary funds raised $40.06 billion in 2020 through June 22, already surpassing the $21 billion raised in all of 2019, according to data from Preqin Ltd. However, two massive funds accounted for a large portion of that amount. Ardian closed a record $19 billion across its eighth secondary fund and related co-investment allocations, while Lexington Partners raised $14 billion for its Lexington Capital Partners IX LP and related vehicles.

Leading up to the pandemic, secondary firms raised funds fairly quickly and easily and continued to amass larger amounts of capital, according to the results of our Guide to the Secondary Market Buyer Survey – “State of the Secondary Market,” 2020 Edition. Among firms surveyed, 54% raised their most recent fund in one year or less, down from 63% in a similar survey in 2019, but still more than half of all respondents. Nearly 68% of this year’s survey respondents characterized their most recent fundraising process as either “fairly easy” or “very easy” with only 32% saying the fundraising process was “somewhat difficult.”

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