Annual deal volume in the secondaries market could grow to as much as $52 billion, according to a recent survey by Kline Hill Partners and Setter Capital.
Respondents to the survey, conducted by Mike Bego-led Kline Hill for an exclusive secondaries dinner held in London in April, were asked for their high and low estimate of the range of annual deal volume for the next five years. The low estimate was $34 billion.
“10 years ago, some LPs viewed the secondaries market as possessing a stigma. Now every LP thinks about it regularly,” said a managing director at a New York-based advisory firm. “If the rule of thumb is circa 5 percent of LP interests transact on the secondaries market, now that number is heading to 10 percent and I think it’s going to continue to go up.”
The survey also asked respondents, mainly UK and Europe-based secondaries buyers, for their views on how secondaries deals closed by all firms this year would perform. Over half of respondents said gross returns on investment (ROI) will be 1.3x to 1.4x, excluding leverage.
About 10 percent said returns will be 1.2x, with 5 percent putting the figure at 1.7x or greater.
High and low estimate of annual secondaries deal volume for next five years
Respondents’ gross ROI (excluding leverage) estimates for secondaries deals in 2016
Source: Kline Hill Partners and Setter Capital
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