Research & Data

Cogent: Secondaries growing at 10% per year

Cogent suggests the private equity secondaries market saw $27.5bn of deal volume last year – and is set to grow by another 10% in 2014.

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The secondaries market saw record transaction volume of $27.5 billion last year, according to the latest pricing report by specialist secondaries advisor Cogent Partners.

Cogent attributed the strong growth – a 10 percent rise on the 2012 total of $25 billion – to a healthy second half of trading and a rise in pricing: buyout fund pricing averaged 92 percent of net asset value last year, while the average across all strategies was 89 percent.

Other contributing factors, Cogent said, included a decline in mega-buyout funds for sale, and a rise in the diversity of sellers and fund types coming to market, including complex transactions. Nearly one-quarter of all deal volume last year comprised ‘non-traditional’ deals such as spin-outs, directsecondaries and restructurings.

Todd Miller, managing director of Cogent, said in a statement 2013 was a “banner year” in the secondary market, in which limited partners and general partners “could leverage healthy capital markets, strong secondary market pricing conditions and growing buy-side demand to execute transactions ranging from sales of legacy portfolios to complex fund restructurings and spinouts”.

This upward trend seen in 2013 is set to continue, according to Cogent managing partner Bob Mooney, who predicted the secondaries market would grow by 10 percent this year due to the effect of the Volcker rule and the positive market environment.

“Given expected near-term market conditions, institutional investors should be able to utilise the secondary market to accomplish their strategic portfolio rebalancing objectives at very attractive pricing during 2014,” said Mooney.

Cogent interviewed what it called “the most active secondaries market participants” for its report. A spokesman said there were around 100 direct respondents known to the company, although a precise figure was unavailable at press time.

In December, Canadian advisory firm Setter Capital said private equitysecondaries activity would hit $27.9 billion for 2013. Across all alternatives, including real estate and infrastructure, Setter estimated activity would total $36 billion.