Secondaries pricing in Asia bounced back strongly in the second half of 2016 after a quiet first half of the year, according to secondaries advisory firm Greenhill’s Asia Secondary Market Review.
The price of Asian secondaries across all strategies averaged 88 percent of NAV in the second half of 2016, up from 82 percent in the first half of the year, the report said. This was driven by “recovering public markets and increased market competition”. A lack of supply of Asian assets continues to drive a supply and demand imbalance, it added.
The pricing picture is sharply divided, with large pan-Asian funds attracting prices of around par and most other growth and venture funds trading at discounts, according to the report. On a fund basis, high exposure to unicorns – start-ups valued at more than $1 billion – is also having a strong impact on the pricing of certain funds.
Compared with the global average, Asia has closed the gap in the second half of 2016. In 2015 Asian secondaries traded at an average price of 85 percent of NAV compared with 90 percent of NAV globally, a figure that widened in the first half of 2016 to 82 percent and 88 percent, respectively. In the second half of 2016 that gap had narrowed to 88 percent of NAV for Asian secondaries and 91 percent globally.
On the sell-side, 2016 saw a decrease in activity from Asian financial institutions as sales related to regulatory requirements tailed off. GP-led deals also increased considerably in 2016, accounting for 40 percent of Asian deals by number and 50 percent by transaction volume, the report said. Greenhill expects funds of funds to be an active seller of Asian assets in 2017.
“We have seen a trend of fund of funds opting for earlier liquidity in order to lock in returns, especially in light of the public market volatility in Asia, as well as pursuing tail-end sales, as older vintage vehicles approach the end of their fund lives,” Greenhill noted.