A flight to quality caused by recession fears is buoying the average price of fund stakes, research from Palico has found.
The mean fund stake sold on the secondaries market in the past six months priced at 101 percent of net asset value, according to a survey of buying LPs conducted by the online private equity marketplace. This compares with 98 percent of NAV when the survey was last conducted in October.
The median price of a fund stake has remained steady since October at par to NAV, suggesting demand at the top of the market is driving up the mean price.
Palico concluded: “Buyers are in the curious position of having to invest a near-record amount of dry powder … at the same time as they are looking to invest more selectively due to rising recession worries. This is leading to more intense bidding and bigger bets on what are viewed as safer funds.”
Funds selling at par or above sold for an average of 107 percent of NAV in the past six months, a slight rise on 106 percent in October’s survey.
The highest successful bid for a fund recorded over the past six months was 130 percent of net asset value for Lindsay Goldberg IV, a 2015-vintage mid-market buyout fund that closed below its $4 billion target on $3.6 billion, according to PEI data.
The fund delivered a net internal rate of return of 32.1 percent and a multiple of 1.5x as of 30 June, according to data from the California Public Employees’ Retirement System.
The survey encompassed 43 private equity funds, including buyout, growth, venture capital and credit, globally.