Discounts narrow for US buyout funds

As more money is put to work on the secondaries market, discounts have narrowed, according to research from placement and advisory firm Triago.

While the net asset value for large US buyout funds rose by an average of 24 percent last year, the discount at which stakes in these funds sell on the secondaries market, on average, narrowed to 1 percent. This is compared with an average of 7 percent at the end of 2012, according to Triago.

The placement and secondaries advisory firm said that an increasing amount of funds are now trading above par value as more cash goes to the secondaries market. “The return to favour of large US buyout funds in the secondary market has been particularly noteworthy,” the firm added.

 Source: Triago

Frustrated with the slow deployment rates of primary funds, more investors are starting to focus on the faster turnaround and the relatively low risk of secondary portfolios than returns generated from discounts, according to Triago.

The firm found that the average sale price of all funds sold on the secondaries fund market has stayed within 8 percent of NAV over the past two years.

 Source: Triago

Triago’s figures cover various types of private equity funds, including portfolios that have infrastructure and real estate strategies, according to a spokesman.