There’s been an uptick in secondary market activity after a slowdown observed in 2022 and early 2023, Crunchbase reports. In the last four to six months, this change was observed as valuations have finally come to reasonable heights.
About 75% of private portfolios are currently experiencing negative net cash flow due to the scarcity of exit opportunities (as of July 2023), according to BlackRock’s 2024 Private Markets Outlook report. Consequently, LPs are looking towards the secondaries market to acquire liquidity and meet distribution requirements.
Moreover, according to Pitchbook, secondary buyers looking for continuation funds are working to bolster their financial capabilities to go for larger deals. Sovereign wealth funds and insurance companies are becoming LPs in these funds alongside secondary buyers.
BlackRock foresees that the surplus of opportunities will persist, leading to additional discounts. They observe appealing valuations in the expanding mid-sized secondaries market, which includes transactions overlooked by larger managers or too substantial for smaller pools of capital to invest in.
With improving market conditions, investor demand for secondary shares has increased. More funds dedicated to secondaries are being raised. This is a win-win situation for both investors and those seeking liquidity.
News Lately
Private market secondary offerings have grown substantially, and BlackRock anticipates further growth in light of improving market conditions. Additionally, there’s an increased participation from both LPs and GPs, especially in smaller transactions. Secondary markets maintain their appeal, despite a slowdown in traditional exits. BlackRock foresees continued growth in deal activity and the emergence of creative transaction structures as demand for liquidity continues.
Frank Porcelli, with his 30 years of asset management experience, joins Star Mountain Capital as Senior Advisor. Prior to joining, he spearheaded the U.S. Wealth Business at BlackRock. Porcelli's expertise will support Star Mountain's offerings in the lower middle-market sector, delivering investors attractive returns with low market correlation. Additionally, he serves as Managing Partner at Convergency Partners. He is also actively involved in supporting elementary education in underserved communities.
Spotlight Transactions
BMO Global Asset Management partners with Carlyle Group to provide Canadian investors broader access to private markets. The partnership’s goal is to offer a global private equity portfolio through a fund, focusing on secondary investments and other opportunities, with low investment minimums. This transaction follows BMO's previous collaboration with Partners Group to launch an investment fund covering various sectors.
Golding’s Golding Secondaries 2022 fund is anticipated to reach its €500m goal following an initial close at €172m in August 2023. Golding Secondaries 2019, the previous fund, closed at €280m, surpassing its €200m target. Secondaries and co-investments comprised 50% of Golding's €1.7bn raised last year.
