Greenhill: 2019 volumes on course to exceed $90bn

A runaway first half has set the secondaries market on course to shatter expectations in 2019, according to research by Greenhill.

Secondaries market volume hit $42 billion in the first half, a 56 percent increase on the same period of last year and more than the full-year total of $37 billion recorded in 2016, according to the secondaries advisor’s Global Secondary Market Trends & Outlook report.

Volume was driven by nine transactions of more than $1 billion in size, including the largest secondaries deal yet, Ardian’s acquisition of a $5 billion portfolio from Japan’s Norinchukin Bank.

“With an eye towards the second half of the year, we expect a busy pipeline and supportive market conditions to drive volume in excess of our prediction for the year of $90 billion,” Greenhill noted.

GP-led deals accounted for $14 billion of transaction volume, equivalent to around 33 percent of total volume, and double the $7 billion they accounted for during the first half of 2018. Recapitalisations involving a continuation fund were the most popular type of complex deal, accounting for 41 percent by value.

Despite record volume, pricing softened in the first half. The average high bid for all funds was 89 percent of net asset value, a decline of 300 basis points on 2018. The average high price for buyout funds, which accounted for 54 percent of funds that changed hands in the first half, declined by two percentage points to 95 percent of net asset value.

“The primary driver of this was a continued supply of tail-end exposure, or 2008- and older vintage funds, which generally have limited upside and full valuations,” Greenhill notes.

The firm expects there to be more than 25 $1 billion-plus deals in full-year 2019 and for GP-led deals to account for around 40 percent of deal volume.