Deal volume fell 10% in 2015 – Evercore

Some strategies such as GP-led restructurings and real estate secondaries bucked the trend and grew in 2015.

Transaction volume in the secondaries market dipped by more than 10 percent in 2015 compared with 2014, according to Evercore Private Capital Advisory’s 2015 Secondary Market Survey Results.

Evercore estimated that transaction volume in 2015 amounted to about $42 billion, down from about $47 billion in 2014, which saw the highest-ever volume.

Nigel Dawn, global head of private capital advisory, told Secondaries Investor that “2014 was very strong so there was a reduction in volume [in 2015].”

Despite the drop, the share of direct secondaries and GP liquidity solutions, which can include GP-led restructurings and tender offers, went up from representing 19 percent of total volume in 2014 to 22 percent of total volume in 2015. GP liquidity solutions, which represented 13 percent in 2015, prompted the increase, according to Dawn.

“We’ve seen a significant amount of activity in that area,” he said. “It’s a very broad category. I would expect that number to go up over time.”

Another category, real estate secondaries, is also growing, accounting for 14 percent in 2015, up from 10 percent in 2014. Dawn anticipates real estate secondaries to continue to grow this year and real estate funds to undergo more GP-led transactions.

Public and private pension funds sold 24 percent of the total 2015 volume. Financial institutions represented the second-largest group of sellers in 2015 at 18 percent of total transaction volume. As expected that share fell dramatically from 2014 when it accounted for 41 percent of volume, due to the postponement of the Volcker rule.

“We’re in a little bit of a low, but it would not surprise me if that share increases this year,” Dawn said, adding that deals would be on the smaller side compared to historically since banks’ exposure to private equity has naturally reduced over time.

To compile its report, Evercore surveyed more than 70 investors including pension plans and sovereign wealth funds with a dedicated secondaries allocation. The report is based on both survey responses and Evercore estimates from those who did not respond. The estimated transaction volume represents purchase price as well as unfunded commitments. The data does not include hedge fund secondaries.