Ardian spends $4.3bn on secondaries

Paris-based Ardian, formerly known as AXA Private Equity, has deployed $4.3 billion in secondary investments during the past twelve months, the firm said in a statement.

Ardian completed 21 secondary transactions during this period, calling it a “clear sign of the robust nature of the secondary fund of funds market”.

The secondary purchases include a portfolio of 11 fund interests from a US pension worth $850 million and a portfolio of 46 assets from a US-based financial institution worth $663 million, both completed in 2012. In 2013, Ardian has completed transactions for two interests in US and European large-cap funds from a European financial institution totaling $335 million and a portfolio of 53 interests in from a European pension, representing a total size of $580 million, Ardian said in the statement.

The prevailing wisdom in the secondary market has been that deal flow has been down this year. Cogent put total transaction volume at around $7 billion in its first half pricing report, though Toronto-based Setter Capital puts the figure at closer to $15 billion. Despite Cogent’s claim, there remain “unprecedented opportunities for high quality secondary deal flow”, according to Ardian.

“I cannot understand how people can say the secondaries market has slowed down, because it is not the reality,” Vincent Gombault, managing partner and head of fund of funds and private debt at Ardian, told Private Equity International.

“The main transactions are coming from banks and insurance companies and pension funds that are reviewing their portfolio. It is not the case that people sell because they have to. People are using the secondaries market to rebalance their portfolio from a strategic approach,” he said.

The secondaries market is about having a size-effect, Gombault said. “When a large pension fund or bank wants to do a deal, they don’t want to take the execution risk. And the best way to avoid this risk is to play with the large players like Ardian, Lexington, Coller and some others. I think the small boutique has no future for sure, because the seller doesn’t want to take the risk that the deal is not done,” he said.

Ardian is currently investing its AXA Secondary Fund V, a $7.1 billion vehicle with an addition $900 million for a sidecar that acts as a primary fund of funds, which it launched in 2010. The fund, which held a final close in June 2012, is currently 92 percent deployed, according to Gombault.

“We have five years to deploy the money, but unless there is some crisis like in 2007 where you need to be very cautious and really freeze your investor programme, we are used to deploy the money in three years,” Gombault said.

It is understood Ardian is currently in market attempting to collect approximately $7 billion for its next secondaries vehicle. Ardian declined to comment on fundraising.