At the beginning of the year, there were some bullish market participants who suggested secondaries transaction volume could smash the $130 billion-plus seen in 2022. Lofty estimates were that figures could creep above $150 billion.

Incoming reports show, however, that first half figures for the year were subdued. Evercore pegged the figure at $42 billion, while Jefferies has it at $43 billion, noting in its first half review that volume was lower than expected. The latter revised its total volume expectations down from $120 billion-plus to $100 billion-plus, in line with activity seen last year.

What this does mean, however, is that second half dealflow is expected to accelerate. We’ve already reported this week what Evercore sees as the drivers behind the pick up in activity, while Jefferies notes in its report that it anticipates $60 billion-plus of volume spurred by a combination of favourable macro conditions, ample dedicated capital and strong pricing.

LP portfolio pricing across asset classes rebounded to 84 percent of net asset value – down 2 percentage points on H1 2022 figures – and up considerably from the 78 percent of NAV seen in the second half of last year, according to Jefferies’ report. LP portfolio pricing for buyouts, which accounted for 72 percent of LP transaction volume, recovered from 84 percent in the back end of 2022 to 90 percent in the first half (off 1 percentage point on H1 2022 pricing).

Slower deployment has led to a slight increase in the capital overhang to 2.3x in the first half from 2.1x in 2022, according to Jefferies. The market now has $220 billion to deploy, though near-term fundraising is expected to drop on previous years, as many buyers have completed their raises. Jefferies anticipates $66 billion is still set to be committed.

The market’s ready to get more transactions off the ground. The vast majority (93 percent) of secondaries buyers that Investec reached out to for a report published this week said they believe deal volumes this year will exceed last year’s levels – up from 79 percent of respondents in 2022.

Jefferies expects a relatively even split in LP-led and GP-led activity moving into the second half. It believes buyers will remain “highly focused” on LP-leds as a source of diversification for their portfolios, while GP-leds will be bolstered namely by three things: a growing investor pool as new players come to market; a “robust” single-asset continuation fund segment; and near-par pricing. That capital overhang, too, will come down as pricing stabilises and buyers pound the pavement with more confidence.

While 2023 may not end a record year for deal volume, participants across the market are rolling up their sleeves for more action in the second half. As always, this is a market segment that always leaves room for surprises.

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