News & Analysis

Asian secondaries hit record high in 2017

Volumes and pricing continued their upward trajectory in 2017, as Asian sellers took a step back from the market, according to Greenhill Cogent.

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Secondaries advisor Greenhill Cogent has released its Asian Secondary Market Trends & Outlook report for 2018. Here are some key takeaways.

Record volume of Asian assets traded in 2017 

Transaction volumes for assets reached a record high of $3.9 billion in 2017, a 63 percent year-on-year increase and equivalent to around 7 percent of the global total. This was driven by a few large $700-million-plus GP-led transactions, most notably Warburg Pincus’s $1.2 billion strip sale, and some sizeable LP portfolio transactions. Around 40 deals were completed last year that involved Asian assets, a 42 percent increase on 2016.

Asian sellers much less active than in previous years

While the volume of assets sold on the secondaries market was at record levels, fewer Asian parties were actively selling, in absolute terms and as a percentage of the global total. The region’s sellers accounted for $2.4 billion of transaction volumes last year, equivalent to 4.2 percent of the total. In 2016, these figures were $3.1 billion and 8.3 percent, respectively.

Growth and venture account for more than half the market

While buyout funds dominate the global market, this is not the case in Asia. Growth and venture capital funds together accounted for 51 percent of all funds traded in the region last year, with China-focused funds accounting for 23 percent of that figure. This outsized presence is due to the large amount of primary capital raised for the asset class and its lower distributed-to-paid-in ratio.

Pricing rebounded in 2017 and is set to remain strong in 2018

The overall price of Asian assets rebounded last year, to 86 percent of net asset value from 83 percent in 2016. Strong public equity markets drove pricing up, which led to higher private valuations and better quality of assets coming to the market. Greenhill Cogent expects pricing to remain strong in 2018, as the supply/demand equilibrium continues to favour sellers of buyout stakes and some unicorn companies held by venture funds as they edge closer to initial public offerings.