H1 secondaries fundraising dwarfs all previous years

Capital raised in final closes jumped 455% year-on-year, setting a record for the strategy, according to Secondaries Investor data.

The secondaries market is set for new heights with fundraising setting a record during the first half of the year, amid a pause in deal-making.

According to Secondaries Investor data, $48.3 billion was raised in the six months to 30 June, compared with $29 billion raised in the previous record first-half of 2018. This figure exceeds all full-year totals apart from 2017, when $49.1 billion was raised.

The figure is a 455 percent rise on the $8.7 billion raised in the first half of last year.

Between January and June, 24 secondaries funds held final close. Ardian‘s ASF VIII programme and Lexington PartnersLexington Capital Partners IX made up 68 percent of the total, collecting a combined $33 billion.

ASF VIII held final close at the start on June on $14 billion, plus $5 billion for co-investments. Lexington closed its latest flagship fund in mid-January on $14 billion.

The largest non-private equity fund to wrap up fundraising in the first half was Goldman Sachs‘ Vintage Real Estate Partners II, which closed in May on $2.75 billion, Secondaries Investor reported.

ICG‘s Strategic Equity Fund III, which specialises in complex GP-led deals, and Banner Ridge Partners‘ Secondary Fund III, which focuses on distressed and special sits, were among other vehicles to hold final close.

Uncertainty around asset valuations caused by the coronavirus crisis has led to diverging expectations between buyers and sellers, raising the question of whether there is enough quality dealflow to soak up all the dry powder.

Speaking to Secondaries Investor after the close of ASF VIII in June, Ardian’s UK head Olivier Decannière said that even if 2020 had a steep drop in transaction volume, he did not expect to have to extend the fund’s five-year investment period.

“I think 2021 will be a good time to deploy in the secondaries market, when people gain a bit of visibility, when they realise where the bottom was and what kind of recovery we can expect,” Decannière said.

Speaking on Tuesday on an AUM call, Partners Group co-chief executive André Frei said that distressed deal volume is unlikely to hit the secondaries market until the second half of next year.

“There will be opportunities but you need to give it more than a month or a quarter,” Frei said. “A year or two after the global financial crisis you saw markets stabilise, then transactions started to happen at the right price.”

The available opportunities will be “fundamentally different” in this crisis, added co-chief executive David Layton.

“You’re going to see many more flight-to-quality assets trading in the next couple of quarters and a lot fewer bottom fisher assets.”