Secondaries fundraising gains ground

Fundraising for secondaries grew more than most other strategies in 2014 despite a fall in private equity fundraising on the whole that year, according to a report by Bain and Company.

Secondaries saw an 18 percent rise in fundraising in 2014 compared with a year earlier, outpacing seven other strategies including buyout, real estate and distressed private equity, according to the management consulting firm’s Global Private Equity Report 2015. Secondaries funds eclipsed even fund of funds, which saw a 16 percent decrease in fundraising in 2014.

The report measured the change based on compound annual growth rate (CAGR).

Dedicated secondaries funds will continue to attract high levels of capital, according to the head of secondaries at a European private equity firm.

“If you look at performance of secondaries funds over the last few years, overall on a risk-adjusted basis secondaries funds perform extremely well,” he said. “In the almost zero interest rate environment, big pockets are looking for ways to deploy money and make some yield, and it makes a lot of sense for people to invest in secondaries funds.”

Only three strategies saw bigger rises in fundraising. Growth saw a 41 percent rise, venture capital rose by 37 percent, and the ‘other’ category, which includes private investments in public equity (PIPEs) and hybrid funds, saw a 50 percent increase.

Mezzanine funds saw a drop of 50 percent in fundraising, the biggest fall out of all 11 strategies.

Total fundraising for private equity in 2014 was $499 billion, a 6 percent slip from the previous year, according to the report.

Source: Bain. Click to enlarge.