Deal volume in H1 down 23% – NYPPEX

An increase in deal volume in the second quarter was not enough to offset the almost halving of secondaries trading seen during the first quarter, according to a report by NYPPEX Private Markets.

Around $15.7 billion traded globally between January and June, a drop of almost a quarter compared with the $20.3 billion in the first half of 2015, according to the advisory firm’s midyear Trends and Outlook Worldwide report.

“Many institutions still have excess cash and are underweight [on] private equity,” Laurence Allen, managing member at the advisory firm, told Secondaries Investor. Such investors are therefore reluctant sellers, he added.

Stock and commodities pricing stability, better-than-expected December net asset values and significant levels of dry powder led to a dramatic increase in volume during the second quarter, the report noted. It did not specify how much was traded during the period.

European private equity funds comprised the biggest segment of deal volume amid concerns about economic growth on the continent and how Brexit will affect NAVs and the timing of exits. UK real estate funds have had up to 17 percent declines in NAVs since the UK’s referendum due to fears Brexit could spark a rise in London office vacancies, the report noted.

In the third quarter, NYPPEX expects deal volume to increase by 10 percent year-on-year as risk-averse investors seek to increase cash allocations and reduce riskier asset holdings due to geopolitical risk, fully valued stock markets, currency devaluation and negative yields on European and Japanese government bonds.

The firm believes a “perfect storm” could be in place for significant dealflow, lower pricing and higher deal volumes, if limited partners’ cashflows turn negative in the fourth quarter.

With around $2.7 trillion in unrealised value held in private equity funds globally, the firm predicts deal volume in the second half will increase by up to 7 percent year-on year.

Source: NYPPEX